How futures work and how to get exposure

Contract specifications and expiry

4 min

A futures contract is standardized down to the last detail by the exchange. To trade one you must understand its spec.

What a spec defines

  • Contract size — the fixed quantity. One CME crude oil contract is 1,000 barrels; one corn contract is 5,000 bushels; one B3 boi gordo contract is 330 arrobas.
  • Quote unit and tick — how the price is quoted (dollars per barrel, cents per bushel) and the minimum price increment (the tick), plus what that tick is worth in money.
  • Delivery months — the specific months a contract is listed for (e.g. corn trades March, May, July, September, December).
  • Delivery/settlement — whether the contract physically delivers the commodity or cash-settles to a reference price at expiry.

Expiry and the danger of delivery

Every futures contract has an expiry date. This is the critical point for a retail trader: if you hold a physically-delivered contract past its first notice / last trading day, you can be obligated to make or take delivery of the actual commodity — a truckload of corn or a tanker of oil. Brokers normally force-close retail positions before this, but you must never assume that.

The infamous April 2020 episode, when WTI crude futures briefly traded at minus US$37, happened because expiring-contract holders had nowhere to store oil and were desperate to avoid delivery. The lesson: always know your contract's expiry and either close or roll well before it.

Why specs matter

Because the contract size is fixed, a single contract carries a large notional value. One crude contract at US$80 controls US$80,000 of oil. That magnitude is why understanding size, tick value and expiry is non-negotiable before placing a single trade.

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