Library
69 explainers, organised by topic. Start with The Basics if you're new.
A futures contract is a standardised, exchange-traded agreement to buy or sell a set amount of something at a set price on a set date. Here is how it works, with real CME examples.
Read the explainer →Who lists futures in the US and Canada, how an electronic order book matches trades, how the clearing house steps in the middle, and how money moves each day.
Read the explainer →Futures and forwards both lock in a price for a future date. They differ in standardisation, where they trade, counterparty risk, and when gains and losses are paid.
Read the explainer →Futures margin is a performance bond, not a loan. See how initial and maintenance margin work, how daily settlement moves cash, and when a margin call comes, with exact arithmetic.
Read the explainer →How to read a futures spec sheet: contract size, tick size and tick value, month codes like ESZ26, settlement type and last trading day, with real CME, ICE and Montréal Exchange specs.
Read the explainer →Why a futures price differs from the spot price: financing, storage and income (cost of carry), how fair value is calculated, what basis means, and why prices converge at expiry.
Read the explainer →Contango means later futures cost more than near ones; backwardation means the reverse. Here is why each happens, how roll yield works with real arithmetic, and real oil market examples.
Read the explainer →Some futures end with real oil, grain or gold changing hands; others end with a cash payment. How delivery works, why first notice day matters, and how index futures cash settle.
Read the explainer →Every futures contract expires, so long-term positions must be rolled into a later month. How rolling works, CME's equity roll dates, what a roll really costs, and how continuous charts are built.
Read the explainer →Futures markets bring together hedgers who want to shed price risk, speculators who take it on, spreaders and market makers. How each works and how the CFTC classifies them.
Read the explainer →How stock index futures work, with real CME and Montreal Exchange specs, tick arithmetic for ES, MES, NQ and SXF, fair value, and overnight trading.
Read the explainer →How interest rate futures work: why SOFR and CORRA futures are priced as 100 minus the rate, how Treasury and CGB bond futures tick, with real exchange specs.
Read the explainer →How WTI and Brent crude oil futures work, with real NYMEX and ICE specs, tick arithmetic, Cushing delivery, expiry rules, and what shapes the oil futures curve.
Read the explainer →How COMEX gold futures work: the 100-ounce GC contract, Micro and 1-Ounce gold, tick arithmetic, vault delivery, and why futures usually sit above spot.
Read the explainer →How grain and oilseed futures work: real CBOT specs for corn, soybeans and wheat, ICE canola, tick arithmetic, crop calendars, and why USDA reports move prices.
Read the explainer →How currency futures work: CME FX contract specs, the Canadian dollar future (6C) with tick arithmetic, interest rate parity pricing, and how futures differ from spot forex.
Read the explainer →How CME bitcoin futures (BTC) and micro bitcoin futures (MBT) work: real specs, tick arithmetic, cash settlement to the CME CF Bitcoin Reference Rate, basis, and 24/7 trading.
Read the explainer →What micro futures are, with real CME specs for Micro E-mini, Micro WTI, Micro Gold, Micro Bitcoin, micro grains and more, plus the leverage arithmetic behind them.
Read the explainer →Short and long hedges explained with real contract specs: how a hedge locks in a price, how to size it with a hedge ratio, and why basis risk means no hedge is perfect.
Read the explainer →Worked examples of a Canadian canola grower and an airline buying jet fuel, with real contract specs, plus what went wrong in the 1996 hedge-to-arrive crisis and airline fuel hedging.
Read the explainer →How futures spreads work: calendar spreads, inter-commodity spreads, the crack and crush spreads with real contract math, how exchanges quote them, and why margin is lower but risk is not zero.
Read the explainer →Why futures trade nearly 24 hours, how a trading day and settlement time are defined, which order types CME Globex supports, and why stop orders can fill far from your price in fast markets.
Read the explainer →What the CFTC's weekly Commitments of Traders report shows, the Legacy, Disaggregated and TFF categories, how to read the numbers with a worked example, and what the report cannot tell you.
Read the explainer →How CTAs and trend-following funds use futures, how a simple time-series momentum rule and volatility sizing work, and an honest look at the evidence, including 2008, 2022 and the weak 2010s.
Read the explainer →How commodity ETFs hold futures, why roll costs make them drift from spot prices, what USO's SEC filings show about April 2020, and how leveraged funds reset daily.
Read the explainer →The real risks of futures: leverage, losses larger than your deposit, overnight gaps, thin markets, margin increases, delivery and broker risk, with worked arithmetic on real contracts.
Read the explainer →How the May 2020 WTI crude oil futures contract settled at -$37.63 a barrel: storage at Cushing, physical delivery, the settlement mechanics, who lost money, and what the CFTC staff report found.
Read the explainer →What really happened at Barings in 1995, Metallgesellschaft in 1993, Amaranth in 2006 and MF Global in 2011, based on official reports, with the arithmetic and the lesson each one teaches.
Read the explainer →How a clearing house becomes buyer to every seller, collects margin twice a day, and absorbs a member's default through the waterfall, with real cases from Lehman in 2008 and Nasdaq Clearing in 2018.
Read the explainer →How daily price limits, equity index futures limits and the 7%, 13% and 20% market-wide circuit breakers work, with the March 2020 halts and a worked example of being limit-locked.
Read the explainer →How the IRS taxes futures: the Section 1256 60/40 split, year-end mark-to-market, Form 6781, the loss carryback election, and worked examples for 2026.
Read the explainer →How the CRA taxes futures: capital vs income treatment, the hedger and speculator rules in IT-346R, the 50% inclusion rate, losses, and worked examples.
Read the explainer →Who polices futures: the CFTC, NFA and exchanges in the US; provincial regulators, the AMF, CIRO and the Montreal Exchange in Canada, with how to check a firm.
Read the explainer →How futures account money is protected: CFTC segregation rules, the residual interest rule, why SIPC excludes futures, CIPF in Canada, and what MF Global taught.
Read the explainer →How futures position limits work: the CFTC's 2020 rule on 25 contracts, spot-month and all-months limits, hedge exemptions, accountability levels, and reporting levels.
Read the explainer →Why commodity futures curves slope the way they do: the theory of storage, convenience yield, Keynes's normal backwardation, and what Gorton, Hayashi and Rouwenhorst found about inventories.
Read the explainer →How CBOT Treasury futures are delivered: conversion factors, gross and net basis, implied repo rate, the delivery options, and a worked cheapest-to-deliver calculation.
Read the explainer →How one-month and three-month SOFR futures settle, how to back out implied policy paths and FOMC meeting probabilities step by step, and how Montreal Exchange CORRA futures differ.
Read the explainer →How commodity index funds work: S&P GSCI and Bloomberg Commodity Index rules, spot vs roll vs collateral return, Gorton and Rouwenhorst vs Erb and Harvey, and the 2000s index boom.
Read the explainer →How professionals turn a futures price into an implied financing rate, worked for S&P 500, gold and Treasury futures, and why the arbitrage that should enforce fair value is never perfect.
Read the explainer →The 3-2-1 crack and the soybean board crush worked per barrel, per bushel and per contract set, with EIA and USDA data, how the real margin differs, listed spread products and margin credits.
Read the explainer →Why commodity prices have seasons, how futures curves already price them in, and what EIA data and academic research show about seasonal returns, including where the patterns fail.
Read the explainer →How time series momentum works in futures: the Moskowitz, Ooi and Pedersen signal, volatility scaling with a worked example, a century of evidence, crisis performance, critiques and weak periods.
Read the explainer →How CME's SPAN model turns 16 risk scenarios into a margin number, how spread charges and credits work, how margin levels are set, and what SPAN 2 changes.
Read the explainer →How Cboe VIX futures work: the $1,000 multiplier, the Wednesday expiry rule, the special opening quotation, why the curve sits in contango, and how VIX ETPs lose to the roll.
Read the explainer →How NYMEX Henry Hub natural gas futures work, how EIA's weekly storage estimate is built, why winter makes gas so volatile, and how LNG exports and 2022 reshaped the market.
Read the explainer →How futures delivery really works: CBOT's three-day notice process, corn shipping certificates and invoices, COMEX gold warrants, CME Rule 538 EFPs, and why few contracts deliver.
Read the explainer →How the Treasury cash-futures basis trade works: implied repo, financing, leverage, who sits on each side in CFTC data, what happened in March 2020, and the SEC clearing mandate.
Read the explainer →What an FCM does between you and the clearing house: FCMs vs introducing brokers, clearing members, CFTC capital rules with a worked example, and dated CFTC data on industry concentration.
Read the explainer →How clearing houses manage default risk under the CPMI-IOSCO principles: margin models, cover 2, default waterfalls, auctions, skin in the game, and lessons from the 2018 Einar Aas default.
Read the explainer →What happened in LME nickel in March 2022: the short squeeze, margin calls, the suspension and cancelled trades, what the Oliver Wyman, FCA and Bank of England reviews found, and the court rulings.
Read the explainer →How Vitol, Glencore and Trafigura make money from physical commodities: hedged cargoes, basis, trade finance, VaR limits, and what the 2020-2024 bribery and manipulation cases revealed.
Read the explainer →How CME block trades and EFRPs work: eligibility, minimum sizes, fair-price and reporting rules, pre-hedging limits, EFP pricing with a worked example, and the disciplinary cases.
Read the explainer →How pension funds, mutual funds and insurers use futures to equitise cash, shift allocations, separate alpha from beta and manage duration, with worked examples and the 2022 UK LDI episode.
Read the explainer →How companies run commodity hedging programs, from policy limits and instruments to proxy hedges, with Southwest, Air Canada, Atmos, Barrick and Hershey disclosures and the academic evidence.
Read the explainer →How cash flow and fair value hedge accounting work under ASC 815 and IFRS 9, with a futures hedge booked through OCI and reclassified, effectiveness tests, and what changes in 2027.
Read the explainer →What spoofing is under the Dodd-Frank anti-spoofing law, how it works in an order book, what the Sarao and JPMorgan cases showed, and what CFTC enforcement data says.
Read the explainer →How the Hunts and their allies amassed silver futures and bullion in 1979, how COMEX Silver Rule 7 and margin hikes broke the run, the margin calls of Silver Thursday, and the 1988 verdict.
Read the explainer →Where CME Group and ICE revenue comes from: per-contract clearing and transaction fees, market data, and interest on collateral, with 2025 volumes and revenue per contract worked out.
Read the explainer →Futures month codes are single letters, F for January through Z for December, used in contract symbols like ESZ6 or CLF7. The full table and how to read a symbol.
Read the explainer →Basis is the difference between the local cash price of a commodity and its futures price. How to read it, why it narrows at expiry, and why it matters to hedgers.
Read the explainer →The front month is the futures contract closest to expiration, usually the most actively traded. What it means, why it changes, and why it matters for prices.
Read the explainer →Leverage in futures means controlling a large notional position with a small margin deposit. How to calculate it, why it magnifies losses, and how you can lose more than you put in.
Read the explainer →A futures margin call is a demand to add money when your account falls below maintenance margin. How it is triggered, how much you owe, and what happens if you don't pay.
Read the explainer →Mark-to-market is the daily process of revaluing every futures position at the settlement price and moving cash between winners and losers. A worked example.
Read the explainer →Notional value is the full market value a futures contract controls: contract size times price. Why it is far larger than your margin, with worked examples.
Read the explainer →Open interest is the number of futures contracts still open at the end of a day. How it differs from volume, how it rises and falls, and what it can and cannot tell you.
Read the explainer →The settlement price is the official end-of-day price an exchange sets for each futures contract. It drives daily margin, P&L and expiry. How it is set and why it matters.
Read the explainer →Tick size is the smallest price move a futures contract can make, and tick value is what that move is worth in dollars. Examples from CME and the Montreal Exchange.
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