Studio Aletheia · The Aletheian Investments and Trading Institute
Futures Trading
Trading Lab 101 · Lesson 10
Futures trading locks in a price today for something delivered later. Today you study how contract size, tick value, and margin work together, how leverage can multiply small price moves into large gains or losses, and why nearly round-the-clock markets demand constant attention.
Learning Targets and Success Criteria
Build the vocabulary and judgment needed to respect how much a small price move can be worth once leverage enters the picture.
What I will learn
- I can explain how futures contracts work and evaluate how leverage affects gains and losses.
- I can calculate how a price move translates into a dollar gain or loss using contract size and tick value.
- I can describe how margin and leverage are connected in a futures position.
- I can decide whether a futures trade is appropriate given a trader's risk tolerance.
What success looks like
- I describe a specific futures contract with correct contract size and tick value.
- I calculate the dollar impact of a price move using that tick value.
- I connect margin to leverage and explain what a margin call means.
- My plan uses today's vocabulary, margin, leverage, tick value, settlement price, and rollover, with accuracy.
The language of today's session.
These five terms carry through the reading, the Futures Playbook, and the trading session that follows.
Margin
Money required to open or maintain a futures position, a good-faith deposit that can go up or down with market moves.
Leverage
The ability to control a large asset with a smaller amount of capital. In futures, leverage comes from using margin.
Tick Value
The smallest possible price change in a futures contract and how much that move is worth in dollars.
Settlement Price
The official daily closing price used by the exchange for marking accounts and calculating gains and losses.
Rollover
Closing a near-expiring contract and opening a new one with a later expiration to keep the trade going.
Reading The Contract
Futures trading rewards traders who respect how much a small price move can be worth once leverage enters the picture.
Futures trading involves buying or selling contracts that obligate a trader to purchase or deliver an asset at a set price on a specific future date. Instead of trading the physical asset directly, traders work with standardized contracts on organized exchanges.
Futures contracts cover a wide range of markets: commodities like crude oil, gold, and wheat, indexes like the S&P 500, currencies like the euro or Japanese yen, and even interest rates. Each futures contract has a defined contract size, how much of the asset it represents, and a tick value, how much each minimum price movement is worth in dollars.
Futures markets are known for leverage. With a relatively small amount of money called margin, a trader can control a much larger position. This leverage can greatly increase potential gains, but it can also turn small price moves into large losses if risk is not controlled.
Unlike regular stock trading hours, many futures markets are open nearly 24 hours a day. That means global news, such as economic reports, wars, storms, or political decisions, can move prices at almost any time. Traders must watch their positions closely and understand how quickly things can change.
Scenario: A Crude Oil Futures Trade
A trader believes crude oil prices will rise over the next month. Instead of buying shares of an oil company, the trader buys a crude oil futures contract.
One standard crude oil futures contract controls 1,000 barrels of oil. If oil is trading at $80 per barrel, the contract represents $80,000 worth of oil. The trader does not need $80,000 in cash. Instead, they post a much smaller margin, for example $6,000, to open the position.
- Every $1 move in the price of oil changes the contract's value by $1,000.
- A relatively small margin deposit controls a much larger contract value.
- A move against the position can trigger a margin call if losses grow too large.
Every small move in the crude oil price now has a big impact. If oil rises by $1 per barrel, the contract gains $1,000 in value. If oil rises by $2, the trader's position is up $2,000. Because the trader only posted $6,000 in margin, a $2 move represents a very large percentage gain. But the same leverage works in reverse. If oil drops by $2 instead, the trader could lose $2,000 very quickly, and the broker may issue a margin call. This is why futures traders must always respect leverage and plan for both outcomes. The same idea of leverage carries into other strategies too: leverage shows up in forex and options, tick value matters in scalping, and margin is a shared concept across options and forex.
Materials for the session.
- A. A chosen futures contract, commodity, index, or currency
- B. The contract size and tick value
- C. A margin requirement and risk tolerance
- D. Notes on overnight and news risk
- E. An exit or rollover plan
Every futures trade: know your contract size and tick value, size the position to your margin, and plan for the move against you before you plan for the move in your favor.
The Futures Playbook
Map a full futures trade end to end, from contract choice and tick math to margin risk and your final decision.
The Trading Session
Trace the five moves a futures trader makes, from choosing a contract to closing or rolling the position.
Trader's Journal
Accountability Checklist
What is leverage, and why can it be dangerous?
Leverage is what makes futures trading powerful and risky at the same time. Define leverage in your own words and give one reason it can be dangerous. Use the word margin in your answer.