Futures Contract
A standardized exchange obligation to buy or sell later: leverage with an expiry date.
A futures contract is a standardized exchange deal to transact later at an agreed price. Leverage comes with an expiry date attached.
A futures contract is a standardized exchange-traded agreement to buy or sell an asset at a set price on a set future date. Clearing houses guarantee both sides, margin is a fraction of notional, and contracts expire into cash or delivery. Retail forex traders meet futures mainly as the deeper market behind CFDs.
How It Works
- Standard size, date and settlement per contract
- Margin is a small fraction of notional
- Expiry forces roll or delivery
Trading Tips
Roll before expiry week spreads widen
Respect the leverage: futures move fast on small accounts
Read contract specs before first trade
Futures Contract Example
Say you buy one crude contract covering 1,000 barrels at $80. A $5 rally banks $5,000 on about $6,000 margin. Expiry week arrives and you roll to next month for a small spread cost instead of taking oil in Oklahoma.
How Traders Use Futures Contract
Trade futures for transparency and depth, CFDs for simplicity. Never hold into expiry accidentally: diary every date on entry. Size from the contract notional, not the margin, or leverage lies to you.
Related Terms
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