What is a futures contract?

A futures contract is an agreement to buy or sell a set amount of something at a price fixed today, for settlement on a later date. The exchange standardizes everything except the price: the size, the tick, the expiration and the settlement method. That is why every ES contract is identical and trades in one central order book.

A long position gains when the price rises and a short position gains when it falls; you do not need to own anything to sell. A clearinghouse stands between buyer and seller, which is why margin and daily settlement exist.

Index futures are cash-settled: no shares change hands at expiration, and most traders close or roll before then, as explained in futures rollover.

Futures contract
A standardized, exchange-traded agreement to buy or sell an underlying at a set price, with settlement on a later date.
Multiplier
The dollar value of one index point. It turns the index level into the dollar value of one contract.
Tick
The smallest step a contract’s price can move. For ES and NQ it is 0.25 index points.

ES and NQ: contract size, tick size and tick value

The multiplier sets what one contract is worth: ES is $50 times the S&P 500 index and NQ is $20 times the Nasdaq-100. Both move in ticks of 0.25 points, four ticks to a point.

Hypothetical: with the S&P 500 at 6,000, one ES contract carries 6,000 × $50 = $300,000 of index exposure. With the Nasdaq-100 at 20,000, one NQ carries $400,000. That is the contract value on the cards at the top of this page, and it is why a small move in points becomes real dollars.

If you trade the ETFs, ES tracks the same index as SPY and NQ the same index as QQQ; see SPY day trading and QQQ day trading. For smaller accounts, CME also lists contracts one-tenth this size, covered in Micro E-mini futures.

  • ES: $50 × S&P 500, tick 0.25 = $12.50, 1 point = $50
  • NQ: $20 × Nasdaq-100, tick 0.25 = $5.00, 1 point = $20
  • Profit or loss = points moved × multiplier × number of contracts

When do futures trade? Nearly 24 hours, Sunday to Friday

ES and NQ trade on CME Globex from Sunday at 6:00 p.m. to Friday at 5:00 p.m. New York time (ET), with a daily one-hour break from 5:00 to 6:00 p.m. ET. The drawing below shows one day as a clock and the whole week as bars. Holidays shorten or change the schedule, so check CME’s calendar around them.

Activity is not equal around the clock. Volume is usually heaviest in the regular stock session, 9:30 a.m. to 4:00 p.m. ET, and around 8:30 a.m. ET economic data; overnight the order book is often thinner. In Riyadh, the daily break falls around midnight to 1:00 a.m. during US daylight time and 1:00 to 2:00 a.m. in US winter. US stock market hours converts the stock session to your time.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn 24-hour clock in New York time with midnight at the top: a green ring for futures trading from 6 PM all the way around to 5 PM, a short red segment for the daily break from 5 to 6 PM, and a yellow inner arc for the US stock session, 9:30 to 4:00. On the right, a week of bars: Sunday from 18:00, Monday to Thursday all day except a red break from 17:00 to 18:00, Friday until 17:00, and Saturday closed.

How does futures margin work? Performance bond and daily mark-to-market

Futures margin is not a down payment or a loan. It is a performance bond: a good-faith deposit showing you can cover daily losses. The exchange sets a minimum initial margin to open a position and a lower maintenance margin to keep it; your broker can require more, and both change with volatility. Stock margin is something else, a loan to buy shares, explained in margin trading.

Every trading day, each open position is marked to market at the settlement price: gains are paid in and losses taken out in cash that same day. The ledger below follows a hypothetical long ES from 6,000.00. After three days it is up 5 points, $250, exactly as if it had been closed at 6,005.

If losses push your balance below the maintenance margin, you get a margin call: add money or reduce the position, or the broker may close it for you, sometimes at the worst moment.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn ledger for a hypothetical long position of 1 ES at 6,000.00 with $25,000 in the account. Day 1 settles at 6,020.00, +20.00 points, +$1,000, balance $26,000; Day 2 at 5,990.00, −30.00, −$1,500, balance $24,500; Day 3 at 6,005.00, +15.00, +$750, balance $25,250. A highlighted total row reads 3 days, +5.00, +$250. Notes: gains and losses are paid in cash at every daily settlement; balance below maintenance margin = margin call.

Futures leverage: a hypothetical example in both directions

Because the margin is a fraction of the contract value, futures are leveraged. Hypothetical: ES at 6,000, a contract value of $300,000 and a margin of $20,000, about 15 times the money put up.

Now let the index move 1%, or 60 points. Long one ES, a rise pays 60 × $50 = $3,000, 15% of the margin; a fall costs the same $3,000. A 6.7% move against you, about 400 points, erases the whole $20,000, and a bigger move or a gap can take more than you deposited. Leverage works on losses exactly as it does on gains.

So size from the stop, not from the margin: on ES, a 10-point stop is already $500 per contract. The position size calculator and risk management guides show how.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn seesaw for a hypothetical 1 ES at 6,000 with $20,000 margin: a small green block labeled margin $20,000 at the far end balances a large block labeled contract value $300,000 near the pivot, marked about 15× leverage. On the right, a green box: index +1%, +60 × $50 = +$3,000, +15% of the margin; and a red box: index −1%, −60 × $50 = −$3,000, −15% of the margin. Bottom note: a 6.7% move against you = the whole margin.

Futures vs ETFs vs options: which fits a beginner?

All three give exposure to the S&P 500 or the Nasdaq-100, but they behave very differently. For intraday charts, UpTickFlow, our own invite-only TradingView indicator, runs on ES and NQ as well as SPY and QQQ; it marks levels, entries and stops, and the choice of instrument stays yours.

  • ETFs such as SPY and QQQ: you buy shares, there is no expiration, and your loss is limited to what you invested unless you use margin. See what is an ETF.
  • Futures such as ES and NQ: leveraged from the first contract, nearly 24-hour trading, daily cash settlement, quarterly expiration and rolling, and selling short is as simple as buying. Losses can exceed the deposit.
  • Options on SPY or QQQ: you pay a premium for a right that loses value with time. Buying limits the loss to the premium; selling can carry large risk. See options trading for beginners.