Futures Contract
A standardized, exchange-traded agreement to buy or sell an asset at a fixed price on a set future date, settled daily via mark-to-market.
Notional Value = Contract Multiplier × Futures Price
A futures contract is a legally binding agreement between a buyer (long) and a seller (short) to exchange an underlying asset — or its cash equivalent — at a predetermined price on the expiration date. Every term is standardized by the exchange: contract size, tick size, settlement method, and trading hours.
The defining feature is daily mark-to-market settlement: gains and losses are credited or debited to the margin account each session, so no large uncollateralized exposure accumulates. This is fundamentally different from a forward contract, which settles only at maturity.
Financial futures (indices, treasuries, currencies) almost always settle in cash; commodity futures (crude oil, metals) can require physical delivery if held through the first notice day.
On the desk
A trader buys 1 ES contract at 5,400. Notional value = 5,400 × $50 = $270,000. The next day ES closes at 5,415 — a 15-point gain worth $750 ($50 × 15) credited to the margin account before the open.