Trading Across Asset Classes · Futures Trading Guide
A commodity name does not identify a complete deliverable. Location, grade, quotation units and seasonal constraints shape the risk of each contract.
Build a specification comparison
Energy contracts can reference barrels, gallons or heat units. Metals may use ounces or tonnes, while crops can be quoted in cents per bushel. Record the product’s exact grade, location and contract quantity. Two futures connected to the same broad commodity can still respond differently when transport, quality or local inventory becomes constrained.
Calculate unit conversions explicitly
Assume a fictional grain contract represents 5,000 bushels and is quoted in cents per bushel. A ten cent move equals $0.10 per bushel, or $500 per contract. Separately, a fictional oil contract representing 1,000 barrels changes by $500 when its price moves $0.50 per barrel. Equal cash moves do not imply equal volatility or delivery exposure.
Respect delivery and seasonal conditions
A harvest year, refinery shutdown or warehouse bottleneck can change nearby prices relative to later maturities. Notice periods and broker deadlines may require action before the chart’s final trading date. Cash settlement and physical delivery are product specific. Do not assume a broker will always close an unsuitable position before an obligation arises.
Do not impose an invented price floor
The May 2020 WTI futures contract traded below zero during severe storage and liquidity stress, as documented by the EIA. This illustrates why a model that assumes every commodity future must remain positive can fail. Product rules and constraints differ. Stress unusual prices, delivery bottlenecks and unavailable liquidity rather than treating the lowest historical positive quote as a guaranteed boundary.
Try it yourself
A fictional contract covers 2,000 units and quotes cents per unit. What is the cash effect of a 1.5 cent move?
Show the worked answer
Convert 1.5 cents to $0.015, then multiply by 2,000. The effect is $30 per contract.
Further reading
- CME Group: Contract specifications
- CME Group: Expiration and settlement
- EIA: Storage and negative WTI futures prices
- USDA: Commodity outlook process
Educational material. Prices, margins and strategy examples are hypothetical unless explicitly identified as contract specifications. They are not trade recommendations. Futures losses can exceed deposited collateral. Product terms and eligibility vary by venue and jurisdiction.
