Amplified exposure

Futures require only a margin deposit — a fraction of the contract's notional value. An ES (S&P 500) contract controls ~$230k of exposure for ~$12k of margin. Gains and losses are magnified proportionally. A 1% move in the index becomes a ~20% move on your margin.

Performance bond

Margin in futures is not a loan — it's a good-faith deposit held by the exchange. Initial margin is required to open a position; maintenance margin is the minimum to keep it open. If your account falls below maintenance margin, you get a margin call and must top up immediately or be liquidated.

Contract lifecycle

Every futures contract has a fixed expiry date. Traders who want to maintain continuous exposure must "roll" — closing the expiring contract and opening the next one before expiry. Roll dates are published in advance. Failing to roll a physical commodity contract could result in actual delivery obligation.

Futures > spot price

When the futures price is higher than the current spot price. Normal for commodities with storage costs — you're paying a premium to take delivery later. For ETFs that hold rolling futures (like USO), contango creates "roll drag" that slowly erodes returns over time even if the spot price stays flat.

Futures < spot price

When the futures price is below the current spot price. Often signals near-term supply tightness — buyers prefer immediate delivery. Backwardation benefits rolling ETF holders because they sell expiring contracts at a premium and buy the next at a discount, creating positive roll yield.