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Futures Terminology

Futures Terminology
Futures are derivatives and they differ from cash instruments such as stocks in many ways. These are some terms you need to be familiar with in order to understand and trade futures.


Ticker The base code of the futures contract. E.g. GC for Comex Gold. This is unfortunately not standardised and different data vendors can use different tickers for the same contract. If you use multiple market data vendors, it may be worth building your own lookup table to be able to easily translate between the different code schemes.
Year A single digit denotes delivery year and the assumption is of course that it is the next possible matching year, if not current.
Code The full code is the combination of the three properties above. So Comex Gold with delivery month June 2012 would usually be designated GCM2.
Month The delivery month is expressed as a single letter, and here thankfully the nomenclature is the same for all vendors. January to December are designated, in order, by the letters F, G, H, J, K, M, N, Q, U, V, X and Z.
Expiry The exact date when the contract expires to either financial settlement or actual delivery. For a trader, this date is only relevant for financial futures, not for commodities or anything that is actually deliverable. For deliverable contracts you need to be out much earlier.
Last Trading Day This is the date you need to pay attention to. The rules are different for different markets and they may use slightly different terminology for this date, (first notice day etc.) but all futures contracts have a predetermined last day of trading for speculators. For physically deliverable contracts, you risk being forced to take or make delivery if you hold beyond this point. In practice this is not likely to happen though, as most brokers will not allow you to enter delivery and they will shut down your position forcefully on this day unless you do first. You don’t want that to happen though, so you better make sure you shut down or roll your position in time.
Contract Size This tells you what one contract represents in real world terms. The Nymex Light Crude Oil as an example represents 1,000 barrels worth, while the Swiss Franc currency future on the ICE represents 125,000 CHF.
Point value For most futures contracts, the contract size and the point value is exactly the same. When you deal with cross asset futures though, you will run into some exceptions to this rule and that necessitates a standard way to calculate your profit and loss, risk etc. You need a way of knowing exactly how much the profit or loss would be if the futures contract moves one full point. For bond futures the answer is usually the contract size divided by 100. With money market futures you need to both divide by 100 and adjust for the duration. So the 3 month Eurodollar future with a contract size of one million, then ends up with a point value of 2,500 (1,000,000 / 100 / 4). Make sure you have a proper lookup table for point value for all contracts you want to trade. Some data vendors tend to confuse this by mixing up tick value and point value, but I stick to the definition of profit variation per full point move, not single tick move.
Currency For the point value to make sense you need to know what currency the future is traded in and then translate it to your portfolio base currency.
Initial Margin The initial margin is determined by the exchange and tells you exactly how much cash you need to put up as collateral for each contract of a certain future. If the position goes against you however, you need to put up more margin so you better not sail too close to the wind here. Your broker will shut down your position if you fail to maintain enough collateral in your account.
Maintenance Margin The amount of money needed on your account to hold on to a contract. If your account drops below this amount you are required to either close the position or replenish funds in your account.
Open Interest Most financial instruments share the historical data fields open, high, low, close and volume, but the open interest is unique to derivatives. This tells you how many open contracts are currently held by market participants. Futures being a zero sum game, someone is always short what someone else is long, but each contract is counted only once.
Sector (asset class) While there are many ways of dividing futures into sectors, I use a broad scheme in this book which makes a lot of sense for our needs. I’ll be dividing the futures markets into currencies, equities, rates, agricultural commodities and non-agricultural commodities.


  1. “Month” is listed twice in Futures Terminology.

  2. Thanks, John. Fixed now.

    I wrote this page a bunch of years ago and forgot it was even here…

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