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Futures Trading

Understanding futures contracts, margin, and trading sessions

What Are Futures Contracts?

A futures contract is a standardized legal agreement to buy or sell a specific asset at a predetermined price at a specified time in the future. Unlike stocks, futures have expiration dates and are traded on regulated exchanges like the Chicago Mercantile Exchange (CME).

Standardized

Each contract specifies exact quantity, quality, and delivery terms

Obligation

Both buyer and seller must fulfill the contract at expiration

Leverage

Control large positions with relatively small capital through margin

Two-Sided

Every contract has a buyer (long) and seller (short)

Cash Settlement — No physical delivery; profits/losses are settled in cash (common for equity index futures like ES and NQ)

Physical Delivery — The actual commodity is delivered (common for agricultural and some energy contracts)

Popular Futures Markets

The most liquid equity index futures contract, representing 50× the S&P 500 index value.

Specification	Value
Point Value	$50 per point
Tick Size	0.25 points ($12.50)
Contract Months	March, June, September, December
Trading Hours	Nearly 24 hours via Globex
Typical Margin	$12,000-$15,000

Tracks the tech-heavy Nasdaq-100 index, representing 20× the index value.

Specification	Value
Point Value	$20 per point
Tick Size	0.25 points ($5.00)
Contract Months	Quarterly (H, M, U, Z)
Trading Hours	Nearly 24 hours via Globex
Typical Margin	$16,000-$20,000

Represents 100 troy ounces of gold, a safe-haven asset often moving inversely to equities.

Specification	Value
Point Value	$100 per point
Tick Size	0.10 points ($10.00)
Contract Months	Bimonthly
Trading Hours	Nearly 24 hours via Globex
Typical Margin	$8,000-$11,000

Margin and Leverage

Futures margin is a performance bond—a good-faith deposit ensuring you can meet your obligations. It's not a down payment; you're controlling the full contract value with a fraction of the capital.

Initial Margin — The minimum amount required to open a futures position

Maintenance Margin — The minimum equity to maintain a position (typically 70-90% of initial margin)

Margin Call — Occurs when account falls below maintenance margin—must deposit more funds or close position

ES at 4500:

Notional value: 4500 × $50 = $225,000
Initial margin: $12,500
Leverage ratio: ~18:1

If ES rises 10 points to 4510:

Profit: 10 × $50 = $500
Return on margin: 4% on a 0.22% market move

Important

High leverage means small market moves create large percentage gains or losses on your margin. A 2% market move can wipe out 36% of your margin. Always use stop losses and size positions appropriately.

Trading Sessions

8:30 AM - 3:00 PM CT (9:30 AM - 4:00 PM ET)

Corresponds to US stock market hours
60-80% of daily volume trades during RTH
Highest liquidity and tightest spreads
Major economic data releases occur here

Asia/Overnight: 5:00 PM - 8:30 AM CT — Lower volume, wider spreads

European: 2:00 AM - 8:30 AM CT — Moderate volume, European data influence

After-Hours: 3:00 PM - 5:00 PM CT — Reaction to late news

Session	Volume	Spread	Best For
RTH	Highest	Tightest	Day trading, scalping
European	Moderate	Moderate	Swing trades
Asia/Overnight	Lowest	Widest	Gap setups

Key Terminology

Tick Size — Minimum price increment (ES: 0.25 points = $12.50)

Point Value — Dollar amount per one-point move (ES: $50)

Volume — Total contracts traded during a period

Open Interest — Outstanding contracts not yet closed or delivered

Front Month — Contract with nearest expiration—highest liquidity

Rollover — Closing expiring contract and opening next month to maintain exposure

Contango — Next month trades higher than front month (common in equity indexes)

Backwardation — Next month trades lower (common in commodities)

Futures use codes: [Symbol][Month][Year]

F = January

G = February

H = March

J = April

K = May

M = June

N = July

Q = August

U = September

V = October

X = November

Z = December

Example: ESH5 = E-mini S&P 500, March 2025

Pro Tip

Most retail traders roll their positions 5-10 days before expiration when volume begins shifting to the next contract. Watch for when the front month's volume drops below the next month.