Basics
The Basics
The Basics covers what a newcomer needs to understand futures mechanically, before any question of trading them comes up. What a futures contract actually obliges both sides to do, how exchanges and clearing houses sit in the middle, how margin and daily mark-to-market move cash in and out of your account every day, how to read a contract specification, why futures prices differ from spot prices, and what contango, delivery and rolling mean. Read in order, the articles build a working mental model of the contract.
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What Is a Futures Contract? The Obligation, the Standard Terms, and Why Futures Exist
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.
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How Futures Exchanges Work: CME Group, ICE, Cboe, the Montréal Exchange and the Clearing House
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 vs Forwards: Standardised vs Custom, Exchange vs OTC, and Who Carries the Risk
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 →How Futures Margin Works: Initial vs Maintenance Margin, Daily Mark-to-Market, and Margin Calls
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 →Futures Contract Specifications: Contract Size, Tick Value, Month Codes and Last Trading Day
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 →How Futures Prices Are Set: Cost of Carry, Fair Value, Basis and Convergence
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 and Backwardation: What They Mean, Why They Happen, and How Roll Yield Works
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 →Physical vs Cash Settlement: How Futures Delivery Works, First Notice Day, and Cash-Settled Index Futures
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 →Rolling Futures Contracts: Why and When to Roll, Roll Dates, Roll Cost, and Continuous Charts
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 →Who Trades Futures? Hedgers, Speculators, Spreaders and Market Makers
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.
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