A futures quote is incomplete without the contract specification. An index at 4,000 might represent $20,000 of exposure in one contract and a much larger amount in another. Similar names and charts do not imply similar dollar risk.
Before trading, translate the contract into three quantities: its notional exposure, the dollar value of a price move, and the cash needed to maintain it.
The multiplier and the tick
Consider a hypothetical index future quoted at 4,000 with a $5 multiplier. One contract represents $20,000 of index exposure. A one-point move changes its value by $5. If the minimum price increment, or tick, is 0.25 points, each tick is worth $1.25.
Two contracts losing 12 points lose 2 × 12 × $5 = $120 before costs. An illustrative $1,500 initial margin requirement does not replace that calculation. Margin is collateral supporting the obligation, not the purchase price or a maximum loss.
Contract codes identify the product and expiry. CME's guide to futures codes explains the root, month, and year convention. Confirm the full contract on the order ticket rather than relying on a familiar root symbol.
Daily settlement makes the path matter
Futures gains and losses are settled as the position is marked to the exchange's settlement price. CME describes this process in its mark-to-market lesson. The daily settlement calculation may differ from the last trade displayed on a chart.
Suppose one $5-multiplier contract is bought at 4,000. A settlement at 3,960 produces a $200 loss. A later move back to 4,000 produces a $200 gain, leaving zero price P&L over the round trip. But the account had to fund the first $200 when it was due. If it could not, liquidation might prevent participation in the recovery.
This is why a view about the final price must be accompanied by a plan for the cash demands along the way. Brokers can also impose requirements above exchange minimums.
Expiry, settlement, and delivery
Some contracts settle in cash according to a defined reference calculation. Others can lead to delivery of an asset. Last trading day, final settlement, and any notice or delivery process are not interchangeable deadlines.
The practical deadline may be earlier than the exchange's final date because a broker does not support delivery or requires positions to be closed beforehand. Consult both the exchange specification and the broker's policy. CME's expiry and roll guide explains why traders close or roll positions before expiration.
A roll changes the contract you own
Rolling usually means closing one expiry and opening another. If the old contract trades at 100 and the next at 102, the two-point gap is not automatically an immediate two-point trading loss. Futures are not ordinarily bought by paying the full quoted notional. You close one marked exposure and establish a new one at its own price.
The new contract can nevertheless perform differently afterward. If it later falls from 102 to 100 while the reference remains unchanged, a long loses two points times its multiplier. The shape of the futures curve and subsequent convergence therefore matter to repeated rolling.
A continuous chart may stitch successive contracts together or adjust historical prices to remove roll gaps. Such a chart is useful for analysis but is not itself an executable instrument. Backtests must reconstruct the contracts actually traded and the costs of changing them.
Sizing in whole contracts
If a planned exit is 12 points away and the multiplier is $5, one contract has $60 of planned price risk. With a $100 budget, one contract fits and two do not, even before allowing for slippage and fees. A stop does not guarantee the assumed exit price.
Our 12-point exit is $60 of planned price risk per contract regardless of the initial margin requirement. If that is too large for the account, a smaller contract can change the exposure; posting less collateral cannot.