To the uninitiated, the term contract can be a little off-putting but it is mainly used because, like a contract, a futures investment has an expiration date. You don’t have to hold the contract until it expires. You can cancel it anytime you like. In fact, many short-term traders only hold their contracts for a few hours – or even minutes!
The expiration dates vary between commodities, and you have to choose which contract fits your market objective.
For example, today is June 30th and you think Gold will rise in price until mid-August. The Gold contracts available are February, April, June, August, October and December. As it is the end of June and this contract has already expired, you would probably choose the August or October Gold contract.
The nearer (to expiration) contracts are usually more liquid, i.e. there are more traders trading them. Therefore, prices are more true and less likely to jump from one extreme to the other. But if you thought the price of gold would rise until September, you would choose a further-out contract (October in this case) – a September contract doesn’t exist.
Neither is their a limit on the number of contracts you can trade (within reason – there must be enough buyers or sellers to trade with you.) Many larger traders/investment companies/banks, etc. may trade thousands of contracts at a time!
All futures contracts are standardised in that they all hold a specified amount and quality of a commodity. For example, a Pork Bellies futures contract (PB) holds 40,000lbs of pork bellies of a certain size; a Gold futures contract (GC) holds 100 troy ounces of 24 carat gold; and a Crude Oil futures contract holds 1000 barrels of crude oil of a certain quality.
Futures and Futures Options can be obtained from the following exchanges: CME, CBOT, COMEX, KCBT, MGEX, ICE, NYMEX, and DME. Trade the Currencies, Energies, Financials, Grains, Indices, Meats, Metals, and Softs. Press CTRL-F on the keyboard to search down through the symbols
Futures Commodity symbols are created in three parts:
the root symbol, the month code, and the year code.
The month code is represented with a single letter as displayed below:
The year code is displayed as one digit:
2015 would be displayed as 5
2016 would be displayed as 6
2017 would be displayed as 7
For example, the E-mini S&P 500, December 2015 contract, would be -ESZ5
-ES is the root symbol
Z is the month of December
5 is for the year 2015