Futures Trading Glossary: 45 Essential Terms

Use this glossary as a quick reference. Terms are listed alphabetically, and many link to a full guide where you can go deeper.

A–C

Ask (offer)

The lowest price a seller is currently willing to accept.

Backwardation

A market condition where nearer contract months trade at higher prices than later months. The opposite of contango.

Basis

The difference between a commodity's local cash price and its futures price. Important to hedgers.

Bid

The highest price a buyer is currently willing to pay.

Bid-ask spread

The gap between the bid and the ask. Tighter spreads usually mean a more liquid market.

Calendar spread

Buying one contract month and selling another of the same product. Also used to roll positions. See Spread trading.

Cash settlement

Settling an expiring contract with a cash payment instead of delivering the underlying asset.

CFTC

The Commodity Futures Trading Commission, the federal agency that regulates U.S. futures and options on futures markets.

Clearinghouse

The organization that becomes buyer to every seller and seller to every buyer, guaranteeing trades and collecting margin.

Commitments of Traders (COT)

A weekly CFTC report showing positions held by different groups of traders. See our COT guide.

Contango

A market condition where later contract months trade at higher prices than nearer months.

Contract month

The month in which a futures contract expires, shown in the symbol by a month code.

Contract unit (contract size)

How much of the underlying asset one contract represents, such as 1,000 barrels or $50 times an index.

D–H

Day-trading margin

A lower margin some brokers allow for positions opened and closed in the same session. Set by the broker, not the exchange.

Delivery

The transfer of the physical commodity when a physically settled contract expires.

E-mini

A family of electronically traded CME Group stock index futures, smaller than the original full-size contracts.

Expiration

The end of a contract's life. The last trading day is the final day it can be traded.

FCM (futures commission merchant)

A firm that accepts customer orders and holds customer funds. See How to choose a broker.

First notice day

For physically delivered contracts, the first day sellers can notify the exchange of intent to deliver. Most retail traders exit before it.

Front month

The contract month with the nearest expiration.

Gap

A jump in price with no trading in between, often after news or overnight. Gaps can cause stop orders to fill at worse prices.

Hedging

Using futures to reduce the risk of price changes in a business or portfolio.

I–M

Initial margin

The deposit required to open a futures position. See Margin and leverage.

Introducing broker (IB)

A firm that solicits or accepts orders but has accounts carried and funds held by an FCM.

Leverage

Controlling a large position with a smaller deposit. It magnifies both gains and losses.

Limit order

An order to buy or sell only at a specified price or better. It may not fill.

Liquidity

How easily you can trade without moving the price. Liquid markets have high volume and tight spreads.

Long

Holding a bought position that gains when prices rise.

Maintenance margin

The minimum account balance required to keep a position open. Falling below it triggers a margin call.

Margin call

A demand to add funds when your account drops below maintenance margin.

Mark-to-market

The daily process of crediting gains and debiting losses based on the official settlement price.

Market order

An order to trade immediately at the best available price. Fast, but the price isn't guaranteed.

Micro contract

A smaller version of a standard contract, such as the Micro E-mini at one-tenth the E-mini's size. See Micro futures.

N–R

NFA

The National Futures Association, the industry-wide self-regulatory organization for U.S. derivatives. Its BASIC database lets you check firms and individuals.

Notional value

Price times contract unit: the total value a contract controls.

Offset

Closing a position with an equal and opposite trade, such as selling a contract you bought.

Open interest

The number of contracts still open at the end of a day. See Volume and open interest.

Physical delivery

Settlement by transferring the actual commodity rather than cash.

Position limit

The maximum number of contracts a trader may hold in certain markets, set by regulators or exchanges.

Price limit

A maximum price move allowed in some contracts within a session, after which trading may pause or be restricted.

Roll (rollover)

Closing a position in an expiring month and opening the same position in a later month.

S–Z

Settlement price

The official daily price the exchange uses to mark positions to market.

Short

Holding a sold position that gains when prices fall.

Slippage

The difference between the price you expected and the price you got, common with market and stop orders in fast markets.

Speculator

A trader seeking profit from price changes rather than hedging a business risk.

Stop order

An order that becomes a market order once a set price is reached. Used to limit losses, but fills aren't guaranteed at the stop price.

Tick

The smallest allowed price move for a contract.

Tick value

The dollar value of one tick for one contract, such as $12.50 for the E-mini S&P 500.

Underlying

The asset, index, or rate a futures contract is based on.

Variation margin

The daily gains and losses paid and received through mark-to-market.

Volume

The number of contracts traded during a period.

Last reviewed October 17, 2026. Educational content only; not investment advice. Contract specifications and margins change, so confirm current figures with the exchange and your broker. See our risk disclosure.