How a futures contract works, in money terms

A futures contract is an agreement about a price, not a thing you own. When you buy one E-mini S&P 500 contract you have not bought five hundred stocks; you have agreed to settle, in cash, the difference between today's index level and the level on the day the contract expires. Everything about the instrument — the leverage, the margin, the daily cash flows, the tax form — follows from that one sentence. This page walks through it in dollars.

The multiplier is the whole instrument

Every index future has a multiplier: the number of dollars one index point is worth. For the E-mini S&P 500 (ticker ES) it is $50 per point. For the Micro E-mini (MES) it is $5 per point — one tenth the size, the same index, the same hours.

Prices move in ticks of 0.25 index points. One tick is therefore $12.50 on ES and $1.25 on MES. A 10-point move in the S&P — an ordinary morning — is $500 per ES contract and $50 per MES contract, in your favour or against you.

The last row is the one to sit with. At an index level of 6,000 — a number chosen for arithmetic, not a forecast — one MES contract moves as if you held $30,000 of the index. You do not have to put up $30,000 to hold it. That gap is the leverage, and the leverage is the risk.

Margin is a deposit, not a price

Nobody pays $30,000 for a contract. The exchange and the broker require a performance bond, which everyone calls margin: cash held against the position so that if it loses, the loss can be collected. It is not a down payment on anything, and it is not what the trade costs; it is what the broker needs to be sure you can pay.

There are two margins, and they are far apart. While the market is open, the desk's broker will carry one MES contract for about $50 of day-trading margin ($500 for ES). Hold the position past the session close and the exchange's own minimum applies instead — about $2,858 per MES contract. Those figures were read at the broker on Aug 27, 2026; they move with volatility, so retake them before trusting them to the dollar.

Run the division at the 6,000 example level and day margin is roughly 600-to-1 leverage on an MES contract; overnight margin is roughly 10-to-1. Day margin is a courtesy the broker extends because it can liquidate you in seconds while the market is open. It is not a sizing rule — a $10,000 account could technically hold 200 MES contracts on day margin, and a 10-point move against it would be $10,000, the whole account. Position sizing from the stop is how the desk sizes instead. The overnight number, and why a weekend gap goes straight through a stop, is its own page.

Losers pay winners every day

Stocks settle when you sell. Futures settle every evening. The exchange marks every open position to the day's settlement price and the losers' accounts pay the winners' accounts in cash that night — CME's own phrase is "losers pay winners every day." The cash that moves is called settlement variation or variation margin.

So a futures position never has a "paper" loss. If you are long one ES and the index closes 20 points lower, $1,000 leaves your account before the next session opens, whether or not you have closed anything. A position held through a bad week drains the account day by day, and if the balance falls below maintenance margin the broker asks for more or closes you out. This is the mechanism behind every futures blow-up story you have read: the loss was collected daily, in cash, until there was none.

Expiry, months and the roll

ES and MES expire four times a year, in March, June, September and December, written with the exchange's month letters: H, M, U, Z. The expiring contract stops trading at the New York Stock Exchange open on the third Friday of its month and settles to a special opening quotation of the index that morning; there is no delivery, only a final cash settlement.

Because of that, anyone holding a position past the roll has to close the expiring contract and open the next one. Most volume moves to the next contract the week before expiry, and the desk's own systems trade the front month and roll on a fixed rule rather than a judgement call. Each quarter's contract has its own price, usually a few points apart from its neighbour, so a chart that stitches contracts together has small jumps at every roll — a detail that matters when you backtest (what a backtest can and cannot tell you).

Hours

Equity index futures trade from Sunday evening to Friday afternoon with a daily pause: in the exchange's own Central Time, Sunday 5:00 p.m. through Friday 4:00 p.m., with a maintenance period from 4:00 to 5:00 p.m. every day. In Eastern Time that is 6:00 p.m. Sunday to 5:00 p.m. Friday, pausing 5:00 to 6:00 p.m. The session the stock market calls "overnight" is simply a thinner part of a continuous futures day, which is why a stock-market gap shows up on a futures chart as a fast move through thin trading rather than a blank space. The weekend is the real gap.

What it costs

Three things, each small and each permanent. The broker's commission per contract per side, which the desk publishes on its Broker Facts panel with the date it was last checked. The exchange and clearing fees, which the broker passes through. And slippage — the difference between the price a signal wanted and the price the market gave, which on a liquid contract like ES is often a tick and on a thin night can be several. A system that wins two ticks a trade before costs is a system that wins nothing after them. The desk's own backtest engine charges every modeled trade two ticks of slippage and a commission per side before it reports a number; sim results on a member's desk are marked at signal prices and say so.

The tax form (United States)

Regulated futures are Section 1256 contracts. For a U.S. taxpayer, gains and losses on them are treated as 60% long-term and 40% short-term regardless of how long the contract was held, and every contract still open at year end is treated as if it were sold at fair market value on the last business day of the year. It goes on Form 6781. That is a different regime from stocks — there is no holding-period game to play, and no wash-sale bookkeeping — but it is also one where a year-end open position creates a tax event with nothing sold. Ask a tax professional about your own situation; this is a description of the form, not advice about it.

The rule that does not apply

Stock traders know the pattern-day-trader rule: FINRA's requirement that an account making frequent day trades in securities keep at least $25,000 of equity. Futures accounts were never under it — CME's own education material says a futures trader "is not required to meet this minimum account size" — and in April 2026 FINRA replaced the pattern-day-trader framework itself with intraday margin standards, effective June 4, 2026. The constraint in a futures account was never a regulator's minimum; it was, and is, margin and the broker's risk limits.

The short version

One point of the S&P is $50 on ES and $5 on MES. Margin is a deposit against loss, not a price, and the day-margin number is a measure of how fast you can be hurt, not how much you should trade. Gains and losses are paid in cash every evening. The contract expires quarterly and is rolled, not delivered. And the honest unit for thinking about any of it is dollars per point multiplied by the points you are willing to lose — which is the next page.

• Margin — day, overnight, and why the number moves
• What a backtest can and cannot tell you
• Why one hand on the rack and not ten
• How to read a win rate
• What holding overnight really takes

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