Futures Trading

Contracts, margin, liquidation and funding — the mechanics of leveraged products and their distinct failure modes.

• 1

  What Futures Contracts Are

  A futures contract is an agreement about a future price, standardised and cleared by a venue. Perpetuals remove the expiry date and replace it with a funding payment — a small change with large consequences.

  8 min read

• 2

  Leverage, Margin and Liquidation

  Leverage does not increase your edge. It compresses the distance between your entry and the point at which the venue closes your position for you — and that distance is the only one that matters when it runs out.

  9 min read

• 3

  Funding and Carrying Costs

  A leveraged position is rented, not owned. Funding, roll costs and fees accrue whether or not you are right, and on longer holds they can quietly exceed everything else you are paying.

  8 min read

• 4

  Perpetuals versus Dated Futures

  A dated contract has an expiry, and expiry is what forces its price to meet spot. A perpetual removes that date and manufactures convergence with a recurring payment instead — which moves the risk rather than removing it.

  8 min read

• 5

  Contract Specifications and Tick Value

  Contract size, tick size, tick value and settlement type are not paperwork. They are the conversion rate between a stop distance on your chart and the money you actually lose — and getting one of them wrong is the most common sizing error on a futures account.

  9 min read

• 6

  Hedging Basics with Futures

  A hedge exchanges one uncertainty for a smaller, different one, and charges you for the swap. It does not avoid loss, it is not free, and because the two legs rarely move together exactly, an imperfect hedge can lose money on both of them at once.

  9 min read