Market Insights

What are futures?

Futures contracts obligate the buyer to purchase or the seller to sell an asset at a predetermined price on a specified future date. While this is the core definition, it’s important to note that most futures traders do not intend to take physical delivery or final cash settlement. Instead, many positions are closed out or “rolled over” to a later contract before expiration to avoid the delivery process.

 

Futures can be based on a variety of assets, including:

• Commodities (oil, gold, wheat, coffee)
• Stock indexes (S&P 500, Nasdaq 100)
• Currencies (EUR/USD, JPY/USD)
• Bonds (U.S. Treasury Bonds)
• Cryptocurrencies (Bitcoin, Ethereum)

 

Crypto futures are relatively new, may have different regulatory and liquidity profiles, and may not be as liquid or widely traded as more established contracts.

For sophisticated traders, the real appeal of futures extends well beyond the definition above – it’s about capital efficiency, tax advantages, and strategic risk management. TradeStation empowers active futures traders to capture these benefits in a few ways, like attractive low intraday margin rates and award-winning† analytic & execution tools, including support for complex bracket and OCO orders.

 

What are some key differences between stocks and futures?

Stocks and futures differ significantly in their structure, trading mechanisms, and risk profiles. Stocks involve direct ownership in a company and are subject to specific regulations and trading hours, while futures are standardized contracts with set expiration dates, higher leverage, and broader trading availability. The following table outlines these differences across key factors such as margin requirements, liquidity, and regulation:

Factor	Stocks	Futures
Ownership	You own a share of a company.	No ownership; you trade a contract.
Expiration	Can be held indefinitely.	Contracts have fixed expiration dates.
Leverage	Limited leverage (unless using margin accounts).	Highly leveraged (small margin controls large position).
Margin	Requires initial and maintenance margin; subject to margin calls.	Requires initial and maintenance margin; subject to margin calls.
Trading hours	Limited to market hours ·        Pre-market: 6:00 AM to 9:30 AM ET ·        Regular market hours: 9:30 AM to 4:00 PM ET ·        Post-market: 4:00 PM to 8:00 PM ET	Extended trading hours, often nearly 24 hours a day. Most futures have defined trading sessions with scheduled breaks. For example, CME Globex offers trading from Sunday evening through Friday afternoon, with a daily maintenance. TradeStation provides tools to actively manage the 24 hour exposure.
Market direction	Ability to go long; shorting requires borrowing shares.	Ability to go long or short (no borrowing required).
Liquidity	Depends on the stock; blue-chips are highly liquid.	High in major markets; some contracts less liquid.
Risk	Limited to investment unless using margin.	Higher risk due to leverage and rapid price movements.
Contract size	Can buy any number of shares (as little as 1).	Fixed contract sizes (e.g., 1 crude oil contract = 1,000 barrels).
Dividends	Eligible for dividends if company pays them.	No dividends paid.
Regulation	Regulated by SEC (Securities and Exchange Commission).	Regulated by CFTC (Commodity Futures Trading Commission).

 

What is margin?

In futures trading, margin refers to the amount of money that a trader must deposit with a broker to open and maintain a futures position. Unlike stock trading, where margin involves borrowing money, in futures trading, margin serves as a performance bond or collateral to ensure that traders can cover potential losses. It is not a down payment or borrowed funds. This distinction is important—some beginners may confuse the two types of margin.

 

The following example table shows some of the recent futures margins:

 

Description	Root	Series	BPV	Exch	Exch Open	Exch Close	Category	Cmcy	Intraday Initial Margin	Intraday Maint Margin	O’night Initial Margin
CRUDE OIL	CL	FGHJKMNUQVXZ	$1,000	NYMEX	18:00	17:00	ENERGIES	USD	$3,410	$3,100	$6,820
COTTON	CT	HKNVZ	$500	CME	21:00	14:20	SOFTS (ICE)	USD	$3,713	$3,375	$3,713
MILK	DA	FGHJKMNUQVXZ	$2,000	CME	17:00	16:00	AGRICULTURE (CBOT)	USD	$1,320	$1,200	$1,320
DOLLAR IN…	DX	HMUZ	$1,000	ICE	20:00	17:00	CURRENCIES (CME)	USD	$1,210	$1,100	$2,240
MINI EURO	E7	HMUZ	$62,500	CME	17:00	16:00	CURRENCIES	USD	$578	$520	$1,155
EURO CUR…	EC	FGHJKMNUQVXZ	$125,000	CME	17:00	16:00	CURRENCIES	USD	$1,155	$1,040	$2,310
E-MINI MIDC…	EMD	HMUZ	$100	CME	17:00	16:00	INDEXES	USD	$16,610	$15,100	$16,610
E-MINI S&P …	ES	HMUZ	$50	CME	17:00	16:00	INDEXES	USD	$1,298	$1,168	$12,980
CME ETHER…	ETH	FGHJKMNUQVXZ	$50	CME	17:00	16:00	INDEXES	USD	$35,570	$32,500	$35,570
FEEDER CA…	FC	FHJKQUVX	$500	CME	08:30	13:05	MEATS	USD	$4,538	$4,125	$4,538
DAX	FDAX	–	$0	CME	08:30	13:05	EUREX	EUR	$29,431	$29,431	$29,431
MINI-DAX	FDXM	–	$0	CME	08:30	13:05	EUREX	EUR	$5,886	$5,886	$5,886
MICRO-DAX	FDXS	–	$0	CME	08:30	13:05	EUREX	EUR	$1,177	$1,177	$1,177
EURO STOXX	FESX	–	$0	CME	08:30	13:05	EUREX	EUR	$3,031	$3,031	$3,031
EURO BUND	FGBL	–	$0	CME	08:30	13:05	EUREX	EUR	$2,287	$2,287	$2,287

 

Within futures trading, there is intraday margin and overnight margin. Intraday margin applies to positions opened and closed on the same trading day. Overnight margin applies to contracts held over multiple days.

Consider this hypothetical example using the E-mini S&P 500 (ES).  The E-mini S&P 500 (ES) is a popular contract among TradeStation traders. The overnight margin listed is $12,980 for one contract.

Thus, to control one contract of the E-mini over multiple trading days, you would need a minimum of $12,980 in your account. If your account falls below the required margin, your broker will issue a margin call. The timeframe to meet a margin call can vary by broker and market conditions—sometimes immediate action is required, especially in volatile markets, and not always within 24 hours. If you fail to meet the margin call, your broker may close your position to limit losses. Specific requirements are typically laid out in your customer agreement, so do consult it for more information.

 

Futures margin type	Explanation	Details
Initial margin	Minimum amount required to open a futures position.	Set by exchange; varies by asset and volatility. Acts as a good faith deposit.
Maintenance margin	Minimum balance to keep position open.	If account falls below this, you get a margin call and must add funds or close the position.
Variation margin	Daily profit/loss adjustment based on market moves.	Reflects gains/losses in your account each day. If the market drops, you may need to deposit more funds.
Intraday margin	Lower margin required for trades closed within the same day.	Set by brokers; can be much lower than initial margin, but increases risk due to higher leverage. Not all futures contracts or brokers offer reduced intraday margins, and the rules can change depending on market volatility. TradeStation offers attractive intraday margins on popular U.S. equity index, energy, and metals contracts.

 

Why do futures margins change over time?

Futures margin requirements fluctuate because market conditions and risks are constantly evolving. Exchanges and brokers adjust margins to maintain market stability and reduce the risk of defaults. Volatility is a key driver of margin fluctuations. When price swings become more extreme, margins increase to protect against rapid losses.

Liquidity also plays a role. Lower liquidity often means it’s harder to close positions quickly, so higher margins are required. Major economic events, geopolitical developments, and unexpected news can trigger sudden margin adjustments to manage increased uncertainty.

TradeStation automatically updates your buying power and risk calculations in real time, greatly reducing the risk of placing a trade without enough margin. You can monitor your margin status and all open positions in the TradeManager interface, which pulls real-time data and alerts into a single dashboard.

 

Other influences on margin adjustments

Exchanges regularly assess market risk by analyzing volatility, open interest, and trading patterns, adjusting margins as needed to prevent excessive leverage. Different contracts carry varying levels of risk, with more volatile or speculative futures (like Bitcoin) requiring higher margins than stable, liquid contracts (like S&P 500 futures).

Regulatory bodies may impose stricter margin rules to control speculation, especially following financial crises. Seasonal supply and demand shifts in commodities can also lead to margin changes. Overall, margins rise when risk and uncertainty increase, helping to protect traders and the market.

 

What is shorting? How can I sell something I don’t own?

To go short, you sell something you don’t yet own with the obligation of buying it back at some date in the future. This is called short selling, going short, or shorting.

It was first used against shares of the Dutch East India Company in the 1600s. Shorting became an increasingly prominent tool in futures trading in the 19th century, when the concept was adopted by the agricultural commodities traders. Short selling has evolved far beyond its origins and is now a common strategy in modern financial markets, used by investors to try to capture profit from declining asset prices or hedge other positions.

When you short a stock, your broker typically lends you the shares, allowing you to sell them on the open market even though you don’t directly own them. If the price of the stock drops, you can buy back the shares at a lower price, return them to the broker and pocket the difference. However, if the price rises, your potential losses are theoretically unlimited, since you are obligated to buy back and return the assets no matter how high the price climbs. Because of these unique risks, regulations require short selling to occur in margin accounts, and brokers may impose additional strict collateral requirements for short selling, making it a strategy best reserved for experienced traders.

Those risks exist with shorting futures as well, but there is a mechanical difference. When you short a futures contract, you don’t actually borrow anything, but you do take on the contractual obligation within.

Like market mechanics, trading technology has come a long way from the manual logbook. TradeStation’s Matrix and Active Trader interfaces deliver near instant flip from long to short, while bracket and OCO orders can automate exit plans.

 

What are futures expiration dates?

Each futures contract is associated with an expiration date. While many agricultural futures contracts have expirations that historically lined up with the time it would take for a crop or livestock to mature and be delivered to market, the specific timing depends on the commodity and exchange rules.

Financial futures and other contracts may have different expiration cycles that not tied to physical delivery timelines. Understanding the nomenclature for contracts is crucial for trading futures at any level.

Common symbols for expiration are H, M, U and Z. Here’s what they represent:

 

Expiration Month	Month Symbol
H	March
M	June
U	September
Z	December

 

A futures symbol is formed of the commodity symbol, an expiration month, and an expiration year.

So, the symbol for the E-mini S&P 500, which expired in March 2025 is:

ES          for the contract

H           representing the month March

25          the year 2025

In full it is ESH25.

Expiration for many contracts often falls on the third Friday of the expiration month, but you should always confirm the exact date.

Many traders typically switch to the next contract on the Monday of expiration week. The process is called rolling over. The timing for rolling over positions can vary depending on the contract, trader preference, and liquidity. Some traders roll over earlier or later than a week before expiration, depending on market conditions and risk tolerance.

RadarScreen® can make managing contracts easier. The tool lets you track real-time volume and open interest for both current and next-month contracts, empowering you to time your rolls to match actual liquidity shifts, helping to minimize slippage.

 

Want to learn more?

Trading futures opens a dynamic world of opportunity, whether you’re seeking to hedge risk, capitalize on market movements, or diversify your portfolio. With a solid understanding of how futures contracts work, the role of margin, and the mechanics of shorting and expiration, you’re now ahead of many beginners. Take the next step by exploring more educational resources in the Futures Education Center.

 

†Visit www.TradeStation.com/Awards to learn more.

 

Futures trading is not suitable for all investors. To obtain a copy of the futures risk disclosure statement visit www.TradeStation.com/DisclosureFutures.

 

Margin trading involves risks, and it is important that you fully understand those risks before trading on margin. The Margin Disclosure Statement outlines many of those risks, including that you can lose more funds than you deposit in your margin account; your brokerage firm can force the sale of securities in your account; your brokerage firm can sell your securities without contacting you; and you are not entitled to an extension of time on a margin call. Review the Margin Disclosure Statement at www.TradeStation.com/DisclosureMargin.

This content is for educational and informational purposes only. Any symbols, financial instruments, or trading strategies discussed are for demonstration purposes only and are not research or recommendations. TradeStation companies do not provide legal, tax, or investment advice.

 

Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on www.TradeStation.com/Important-Information/.

 

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