Crypto and derivatives · updated October 21, 2026
What are futures contracts and how do they work
A futures contract is an agreement in which the buyer and the seller fix today the price at which they will trade on a future date. Unlike options, both sides are obliged. They trade on exchanges, on oil, gold, grains, indices, currencies and Bitcoin.
Futures formula
- Contract size
- How much one contract covers: for example 1,000 barrels of oil.
- Margin
- The amount you leave with the broker as collateral, usually 5-15% of the contract's value.
Worked example
You buy one contract on 1,000 barrels of oil at $70 a barrel. You put up $7,000 of margin. The price rises to $73.
Oil rose only 4.3%, but the gain on the money you put in is ten times bigger. The other way round, a drop to $63 would wipe out the whole margin.
Worth knowing
Gains and losses are settled every day. If your margin falls below a threshold, the broker asks you for more money or closes your position.
When futures can fool you
High leverage: a small price move can wipe out the whole margin. Expiry: the contract ends on a fixed date; to stay in the trade you have to replace it with a new one (rollover), which can cost money. Physical delivery: some contracts end with the goods being delivered; brokers usually close the position before that.
Related terms
Learn it in the Academy
Questions about futures
Who uses futures?
Producers and buyers of commodities who want to lock in prices (a farmer, an airline), and investors who speculate on prices.
Can I lose more than my margin?
Yes. If the price moves very far against you, the loss can exceed the margin and you owe the broker the difference.
These explanations are for information only. They are not a recommendation to buy or sell.
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