Investor’s Manual: What Are Futures?

Understanding the basics of futures. This is a brief futures 101 defining what are futures.

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A futures contract is a legally binding agreement to buy or sell a standardized asset at a predetermined price at a specified time in the future. Typically, futures contracts are traded electronically on exchanges such as CME Group, which is the largest futures exchange in the U.S.

Many futures contracts—such as those based on crude oil, gold, soybeans, and more—have origins quite literally at ground level (or below ground). What futures markets do over the short- and long-term can tell investors a lot about what’s going on in the world (how much it will cost to fill your gas tank before your summer road trip, for example).

All futures contracts are “standardized,” and spell out certain specifications, including:

  • Quality and quantity of a commodity
  • Unit pricing of the asset and minimum price fluctuation (tick size)
  • Date and geographic location for physical “delivery” of the underlying asset (but actual physical delivery rarely happens, as most contracts are liquidated before the delivery date). TD Ameritrade does not allow for physical delivery of the underlying asset.

For example, a December 2018 corn futures contract traded on CME Group represents 5,000 bushels of the grain (trading in dollars per bushel)to be delivered by a certain date that month. Crude oil futures represent 1,000 barrels of oil, and are quoted in dollars and cents per barrel.

Time to Hit the Market?

TD Ameritrade offers a broad array of futures trading tools and resources. Qualified traders can trade more than 60 futures products virtually 24 hours per day, six days per week.

To further explore the world of futures trading, visit the TD Ameritrade futures trading page.

Also, watch the video below to learn more about futures trading.

Investing Basics: Futures
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Futures trading is speculative, and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products. Futures trading services provided by TD Ameritrade Futures & Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.

Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC).



Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2019 TD Ameritrade.

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