Futures Foundations · Futures Trading Guide

Futures gains and losses depend on price direction, the multiplier and quantity. A short sale is not an upfront receipt of the full contract value.

Use the direction of the position

For a linear long future, gross result is closing price minus opening price, multiplied by the price multiplier and contract quantity. For a short, reverse the price subtraction. A higher closing price hurts a short and benefits a long. These rules describe the trading result, not a return on the amount of collateral that happened to be required at entry.

Calculate both outcomes

Assume a fictional contract is worth $10 per point. A trader shorts three contracts at 420 and covers at 414. The six point decline earns $180 before fees. Covering at 427 instead loses $210. If the total round trip charge is $4 per contract, the first result becomes $168 and the second a $222 loss. Any additional slippage must be reflected in actual fill prices or recorded separately, never counted twice.

Reconcile daily cash with the trade result

Suppose a long enters at 100, settles at 103 and closes the following day at 102, with a $50 multiplier. The first settlement credits $150. The next price change debits $50. Total gross profit is $100, exactly the two point entry to exit move. Adding the full $100 again to the settlement flows would overstate performance.

Keep cash records complete

Track deposits and withdrawals separately from trading profit. Keep commissions, exchange charges, financing or cash interest where applicable, and currency conversions in their own fields. An account balance can rise because money was deposited even when the strategy lost. Neither a long nor a short futures position has the option buyer’s premium based loss limit. Margin requirements and the ability to exit do not impose a guaranteed maximum loss.

Try it yourself

One fictional long future has a $25 multiplier. It enters at 800 and exits at 792. Total costs are $6. What is the net result?

Show the worked answer

The eight point adverse move loses $200. After $6 of costs the net loss is $206.

Further reading

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.

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