Trading & Markets
Futures Contract
A standardized agreement to buy or sell an asset at a set price on a future date, traded on exchanges like CME. The instrument behind futures prop trading.
In plain English
Futures are exchange-traded contracts on indexes, commodities, currencies, and rates. Prop traders overwhelmingly trade the index futures: ES (S&P 500), NQ (Nasdaq 100), YM (Dow), and RTY (Russell 2000), plus crude oil (CL) and gold (GC).
Each contract has a fixed tick size and tick value, so profit and loss math is exact: contracts times ticks times tick value. Futures trade nearly 23 hours a day with a daily settlement, which is what end-of-day drawdowns key off.
- Buying 1 ES contract at 5000.00 and selling at 5002.00 is an 8 tick move worth $12.50 per tick: $100 profit before commissions.