A futures contract is a standardized product. The exchange decides what it covers, how big it is, how its price moves, when it expires, and how it settles. Learning to read those specifications is the most practical skill a beginner can develop, because it tells you exactly how much money each price move puts at stake.
Contract size and notional value
The contract unit defines how much of the underlying asset one contract represents. A few common examples:
| Contract | Contract unit |
|---|---|
| E-mini S&P 500 (ES) | $50 × the S&P 500 index |
| Micro E-mini S&P 500 (MES) | $5 × the S&P 500 index |
| WTI Crude Oil (CL) | 1,000 barrels |
Multiply the price by the contract unit and you get notional value, the total market value the contract controls. If the S&P 500 index is at 5,000, one E-mini contract controls 5,000 × $50 = $250,000 of exposure. One Micro E-mini controls 5,000 × $5 = $25,000. Always check the current specs on the exchange's website before trading; exchanges publish them for every product.
Tick size and tick value
Futures prices move in fixed minimum steps called ticks. The tick value is what one tick is worth in dollars for one contract.
- E-mini S&P 500: tick = 0.25 index points. At $50 per point, one tick = $12.50.
- Micro E-mini S&P 500: tick = 0.25 index points. At $5 per point, one tick = $1.25.
- WTI Crude Oil: tick = $0.01 per barrel. With 1,000 barrels, one tick = $10.
Worked example: profit or loss
CME Group's own teaching example: a trader buys one crude oil contract at $53.60 and the price rises to $54.00. That's a $0.40 move, or 40 ticks. At $10 per tick, the gain is 40 × $10 = $400 per contract. If the price had fallen 40 ticks instead, the loss would be the same $400.
The formula works for any contract:
Profit or loss = ticks moved × tick value × number of contracts
Expiration and contract months
Every futures contract has an expiration. Exchanges list several contract months at once, so at any time you can trade the nearest month (the "front month") or later ones. The last trading day is the final day you can trade that contract; for many contracts it's tied to a set day of the expiration month, but the exact rule varies by product and is printed in the specs.
Most traders don't hold to expiration. They close the position or roll it to a later month. Read Expiration and rollover for how that works, and Reading futures symbols to see how the month appears in a ticker.
Physical delivery vs. cash settlement
When a contract expires, it settles in one of two ways:
| Method | What happens | Typical examples |
|---|---|---|
| Physical delivery | The seller delivers the actual commodity and the buyer pays for it, under exchange rules. | Many agricultural, energy, and metal contracts |
| Cash settlement | No goods change hands. Positions are closed at a final settlement price and the difference is paid in cash. | Stock index contracts such as the E-mini S&P 500 |
Don't drift into delivery
Individual traders rarely want 1,000 barrels of oil or 5,000 bushels of corn. Brokers typically require retail customers to close physically delivered contracts before the delivery period begins and may close positions for you. Know your broker's deadlines.
Exchanges and the clearinghouse
In the U.S., futures trade on regulated exchanges such as those owned by CME Group (CME, CBOT, NYMEX, and COMEX) and ICE. Trading happens mostly electronically, nearly around the clock for many products.
Behind every trade is a clearinghouse. Once a trade is matched, the clearinghouse becomes the buyer to every seller and the seller to every buyer. That means you don't need to worry about whether the anonymous trader on the other side will pay; the clearinghouse guarantees performance and manages that risk by collecting margin.
The CFTC regulates U.S. futures markets, and the National Futures Association (NFA) oversees the firms and individuals who deal with customers. With limited exceptions, futures must be traded on an exchange through CFTC-registered firms.
Daily mark-to-market
At the end of each trading day, the exchange sets an official settlement price for each contract. Your account is then credited or debited for the change from the previous day's settlement. Gains are added to your account; losses are taken out.
This daily accounting means losses don't pile up quietly. If a losing day pushes your account below the maintenance margin level, you'll get a margin call: add money, reduce your position, or risk having it closed by your broker. We cover this in detail in Margin and leverage explained.
How to read a contract spec page
- Find the contract unit and calculate today's notional value.
- Note the tick size and tick value. Write down what a 10-tick and a 50-tick move would cost you.
- Check the listed months and last trading day for the contract you plan to trade.
- Confirm the settlement method and your broker's deadline for physically delivered products.
- Check trading hours, since many products trade overnight and liquidity varies.
Do this for every new market before you place a single trade. It takes ten minutes and prevents the most common beginner surprises.
Price limits and trading halts
Some futures contracts have daily price limits or price bands that restrict how far the price can move in a session, and exchanges may pause trading during extreme moves. These rules differ by product and can change, so check the specifications. Price limits don't remove risk: if a market hits its limit, you may be unable to exit until trading resumes, and the next price could be much worse.
Before you trade
Futures are leveraged. A small price move can produce a large gain or loss, and losses can exceed the money in your account. This article is general education, not a recommendation to buy or sell any contract.
- Practice in a simulated (paper) account before using real money.
- Decide your maximum loss per trade before you enter, and size positions to it.
- Confirm current contract specifications and margin requirements with the exchange and your broker.
Common questions
Where do I find a contract's specifications?
On the exchange's website. For CME Group products, each contract has a Contract Specs page listing the contract unit, tick size, trading hours, listed months, and settlement method.
What is notional value?
The total market value a futures contract controls: price times contract size. An E-mini S&P 500 at an index level of 5,000 has a notional value of 5,000 × $50 = $250,000.
Who guarantees the other side of my trade?
The exchange's clearinghouse. It becomes the buyer to every seller and the seller to every buyer, and it collects margin and settles gains and losses daily to manage that risk.
Sources
- Introduction to Futures — CME Group Education. www.cmegroup.com/education/courses/introduction-to-futures.html
- Calculating Futures Contract Profit or Loss — CME Group Education. www.cmegroup.com/education/courses/introduction-to-futures/calculating-futures-contract-profit-or-loss.html
- Mark-to-Market — CME Group Education. www.cmegroup.com/education/courses/introduction-to-futures/mark-to-market.html
- Micro E-mini S&P 500 Contract Specs — CME Group. www.cmegroup.com/markets/equities/sp/micro-e-mini-sandp-500.contractSpecs.html
- Futures Market Basics — U.S. Commodity Futures Trading Commission. www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/FuturesMarketBasics/index.htm
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.
