What is a Futures Contract?

A Futures Contract is a contractual agreement to buy (long) or sell (short) a financial instrument or commodity on a set date at an agreed price. As futures contracts have exceptional market liquidity, trades can be conducted on tight spreads with low cost and transparent pricing. Futures are based on a variety of assets and asset classes, from government bonds and precious metals to milk, currencies, stock indices, electricity, maize or interest rates.

The rationale behind a Futures Contract is that the risk of either party defaulting is minimal, as both parties are required to provide a set amount of cash (collateral) up front, which is known as the margin. Margin size is established by the Futures Exchange and any margin account which goes below a certain value must be replenished. An investor should be prepared to place between approximately 1% and 10% in margin.

Unless a Futures Contract is rolled over, any outstanding amount is exchanged on the day of delivery. This amount is known as the spot value.

How we can help

The world-class trading platforms on offer allow you to access a wide range of assets as well as connect with indices across the global futures markets. In addition, you can trade a futures spread from one ticket without any legging risk or spread risk of execution. The platforms also allow you to use limits, stop-limits, stops and trailing stops, all of which can be placed through the trade module, order module or account summary modules.