What it means
Traders rarely hold futures to expiry; they trade the contract's price moves. Equity index futures expire quarterly (March, June, September, December), so positions get rolled to the next contract.
Example
One NQ contract gains or loses $20 for every point the Nasdaq-100 futures move.
In practice
Futures give direct exchange-traded access to indices, commodities, currencies and interest rates, with central pricing and real volume. Day traders favour index futures such as ES and NQ for their liquidity and for trading nearly 24 hours a day from Sunday evening to Friday afternoon New York time.
Each contract has a fixed value per point and per tick, so position size is counted in whole contracts. You post margin rather than paying the full value, and profits and losses are settled to your account every day.
What to watch for
Leverage is built in: a small account can control a very large position. Work out the dollar value of your stop distance before entering, and know your contract's expiry so you are not caught holding it into the roll.
Related terms
4 terms- Micro futuresFutures contracts one tenth the size of the standard ones, so smaller accounts can size positions properly.
- MarginThe deposit needed to open and hold a leveraged position.
- TickThe smallest price step a futures contract can move, worth a fixed dollar amount.
- LeverageControlling a position larger than your cash; it magnifies gains and losses equally.