Futures Trading
Trade global markets with leverage across all asset classes
Futures Fundamentals
Futures Contract
Standardized agreement to buy/sell asset at future date
Example: ES contract = 50 x S&P 500 index value
Margin
Good faith deposit to control contract
Example: $500 margin controls $50,000+ contract value
Tick Size
Minimum price movement of contract
Example: ES tick = 0.25 points = $12.50
Contract Size
Amount of underlying asset per contract
Example: CL (Crude Oil) = 1,000 barrels
Expiration
Date contract must be settled
Example: Third Friday of contract month
Rolling
Moving position to next contract month
Example: Close March, open June contract
Contango
Future prices higher than spot
Example: Storage costs cause higher forward prices
Backwardation
Future prices lower than spot
Example: Supply shortage causes inverted curve
Major Futures Contracts
Equity Index
| Symbol | Name | Contract Size | Tick Value |
|---|---|---|---|
| ES | E-mini S&P 500 | $50 x index | $12.50 |
| NQ | E-mini Nasdaq 100 | $20 x index | $5.00 |
| YM | E-mini Dow | $5 x index | $5.00 |
| RTY | E-mini Russell 2000 | $50 x index | $5.00 |
Energy
| Symbol | Name | Contract Size | Tick Value |
|---|---|---|---|
| CL | Crude Oil | 1,000 barrels | $10.00 |
| NG | Natural Gas | 10,000 MMBtu | $10.00 |
| RB | Gasoline | 42,000 gallons | $4.20 |
| HO | Heating Oil | 42,000 gallons | $4.20 |
Metals
| Symbol | Name | Contract Size | Tick Value |
|---|---|---|---|
| GC | Gold | 100 troy oz | $10.00 |
| SI | Silver | 5,000 troy oz | $25.00 |
| HG | Copper | 25,000 lbs | $12.50 |
| PL | Platinum | 50 troy oz | $25.00 |
Agriculture
| Symbol | Name | Contract Size | Tick Value |
|---|---|---|---|
| ZC | Corn | 5,000 bushels | $12.50 |
| ZW | Wheat | 5,000 bushels | $12.50 |
| ZS | Soybeans | 5,000 bushels | $12.50 |
| LE | Live Cattle | 40,000 lbs | $10.00 |
Currencies
| Symbol | Name | Contract Size | Tick Value |
|---|---|---|---|
| 6E | Euro FX | €125,000 | $12.50 |
| 6J | Japanese Yen | ¥12,500,000 | $12.50 |
| 6B | British Pound | £62,500 | $6.25 |
| 6A | Australian Dollar | A$100,000 | $10.00 |
Treasuries
| Symbol | Name | Contract Size | Tick Value |
|---|---|---|---|
| ZN | 10-Year Note | $100,000 | $15.625 |
| ZB | 30-Year Bond | $100,000 | $31.25 |
| ZF | 5-Year Note | $100,000 | $7.8125 |
| ZT | 2-Year Note | $200,000 | $7.8125 |
Understanding Margin
Initial Margin
Amount required to open position
Typical: 3-12% of contract value
Example: $500 for MES contract
Maintenance Margin
Minimum to keep position open
Typical: 75-90% of initial margin
Example: $400 maintenance for $500 initial
Day Trading Margin
Reduced margin for intraday only
Typical: 25-50% of initial margin
Example: $50 for MES day trading
Margin Call
Demand for additional funds
Typical: When below maintenance margin
Example: Must deposit or close position
Futures Trading Strategies
Trend Following
Trade in direction of established trend
Setup: Moving average crossovers, breakouts
Risk: Whipsaws in choppy markets
Spread Trading
Trade price difference between related contracts
Setup: Calendar spreads, inter-commodity spreads
Risk: Lower risk than outright positions
Scalping
Quick trades for small profits
Setup: Trade order flow, tick charts
Risk: High commission costs
Swing Trading
Hold positions for days to weeks
Setup: Technical patterns, support/resistance
Risk: Overnight gap risk
Hedging
Protect portfolio or business risk
Setup: Opposite position to cash market
Risk: Basis risk, margin calls
Arbitrage
Exploit price differences
Setup: Cash vs futures, exchange arbitrage
Risk: Execution risk, limited opportunities
Trading Hours
CME Globex Hours
- Sunday: 5:00 PM CT open
- Mon-Thu: 23 hours trading
- Friday: Close 4:00 PM CT
- Daily Break: 4:00-5:00 PM CT
Key Sessions
- Asia: 6:00 PM - 3:00 AM CT
- Europe: 2:00 AM - 11:00 AM CT
- US: 8:30 AM - 3:00 PM CT
- Settlement: Various by product
Pros and Cons of Futures Trading
Advantages
- ✓ High leverage available
- ✓ Nearly 24-hour trading
- ✓ Deep liquidity in major contracts
- ✓ No pattern day trader rule
- ✓ Tax advantages (60/40 rule)
- ✓ Direct market access
- ✓ Hedge portfolio risk
- ✓ Trade all asset classes
Disadvantages
- ✗ Unlimited loss potential
- ✗ Complex for beginners
- ✗ Margin calls possible
- ✗ Contract expiration
- ✗ Gap risk overnight
- ✗ High capital for some contracts
- ✗ Emotional stress from leverage
- ✗ Market manipulation possible
Futures Risk Management
Position Sizing
- • Risk 1-2% per trade
- • Scale with account size
- • Use micro contracts
Stop Losses
- • Always use stops
- • Trail profitable trades
- • Honor your stops
Diversification
- • Trade multiple markets
- • Avoid correlation
- • Spread risk across time
Micro vs E-mini Contracts
| Feature | Micro | E-mini |
|---|---|---|
| Contract Size | 1/10th of E-mini | Standard |
| S&P 500 Value | $5 per point | $50 per point |
| Margin Required | ~$50-100 | ~$500-1,500 |
| Best For | Beginners, small accounts | Experienced, larger accounts |
Getting Started with Futures
1. Education
Learn contract specs and margin
2. Simulator
Practice with real-time data
3. Start Micro
Begin with micro contracts
4. Scale Up
Gradually increase size
Futures Trading Resources
Essential Futures Trading Tips
Success Factors
- • Start with micro contracts
- • Focus on 1-2 markets initially
- • Use stop losses always
- • Manage risk aggressively
- • Keep detailed trading journal
Common Pitfalls
- • Over-leveraging positions
- • Ignoring overnight risk
- • Trading too many markets
- • Not understanding contract specs
- • Emotional decision making