What is a futures contract?
In one line: A futures contract is a standard agreement, traded on an exchange, to buy or sell a set amount of something at a set price on a future date.
A simple example
The E-mini S&P 500 future (ticker ES) tracks the S&P 500 Index. Every contract is the same size: $50 for every 1 point the index moves.
Say you buy one ES contract at 5,800 and it rises to 5,810. That's 10 points × $50 = $500. If it falls 10 points instead, that's a $500 loss. The smaller Micro E-mini (MES) is one tenth the size: $5 a point, so the same 10-point move is $50.
The smallest step ES can move is 0.25 of a point, one Tick, worth $12.50. Check cmegroup.com for current specs, or use the futures tick value calculator.
What makes it a futures contract
- Standard size. The exchange (like CME Group) sets how much one contract covers: 1,000 barrels of oil, 100 ounces of gold, $50 × the S&P 500.
- An end date. Each contract expires. Stock index futures expire in March, June, September and December.
- Margin, not full price. You put up a deposit (margin), not the full value. That's built-in Leverage: small moves become big dollar swings.
- Daily settling. Gains and losses are added to or taken from your account every day.
Most traders never take delivery of oil or gold. They close or roll the trade before the end date. See Contract rollover.
Why it matters
Futures trade almost 24 hours on weekdays, with clear, fixed tick values. That makes the math clean: you know exactly what each tick costs before you enter. Our futures guide for beginners and the ES market page go deeper.
A common mistake
Starting with a full-size contract. One ES contract moves $50 a point, so an ordinary 20-point swing is $1,000. Micro contracts exist so you can size small. Set your stop from the chart, then work out how many contracts (if any) fit your risk.
Questions
Do you have to buy the oil if you hold a futures contract?
Some contracts, like crude oil, can end in physical delivery. Most retail brokers make you close or roll before that. Stock index futures settle in cash.
How much money do you need to trade futures?
It depends on the contract's margin and your broker. Micro contracts need far less than full-size ones. Our guide on how much money to start trading covers it.
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