04 / FUTURES
Futures basics: contracts, margin and exposure
THE PHANTOM PLAYBOOK · INTRODUCTORY READING
A futures contract is an agreement to buy or sell an asset at a specified future time under standardized terms. Contracts differ in their size, settlement method, and other specifications.
Margin is not a loss limit.
A futures position can create exposure larger than the initial funds posted. Losses can exceed that initial amount. Leverage magnifies the effect of market movements, so the deposit alone is not a measure of the risk.
Read the specification.
Identify the underlying product, contract size, price increments, expiration, and settlement method. Do not assume that contracts with similar names have identical terms.
Practice prompt: before interpreting a contract's price movement, explain what one contract represents. Which details would you need to translate a move into a monetary change?
Read the primary guidance
CFTC: Futures Market Basics. Futures are complex and risky; this page is an introduction, not a suitability assessment.
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