Futures Outright: how the position works
A single long or short futures contract. The payoff is linear and symmetric — there is no premium, no decay and no strike — and the entire character of the position comes from leverage: you post margin worth a fraction of the notional and gain or lose on the whole of it. One E-mini S&P contract at 5,800 controls $290,000 of index exposure on roughly $20,000 of margin.
- Market view
- Directional — leveraged, linear
- Opened for
- Margin
- Maximum profit
- Unbounded for a long as the price rises; for a short, bounded only by the price falling to zero.
- Maximum loss
- Bounded by the price reaching zero for a long, and unbounded for a short. In both cases losses can exceed the margin posted, and the balance is owed.
- Breakeven
- The entry price, adjusted for commissions and any financing.
How it is built
- Buy (or sell) 1 futures contract for a given delivery month
All figures above are quoted per share and settle at expiry. A standard equity option covers 100 shares, so multiply by 100 for a single contract.
Before expiry: the Greeks
Delta is 1 per contract and nothing else applies — no gamma, no vega, no theta. What replaces them is the multiplier and the margin cycle: profit and loss are marked to market and settled in cash daily, so an adverse move demands cash before the trade is over rather than at the end of it.
When to use it
For efficient directional exposure to an index, rate or commodity, for hedging an existing physical or portfolio position, or for round-the-clock access to a market whose cash session is closed. It is also the cleanest instrument when you want exposure without an options premium to recover.
What goes wrong
- Losses are not limited to the margin posted. A gap through your stop can leave a debit balance owed to the broker.
- Daily variation margin is a cash obligation. A position that is ultimately right can be closed out by a margin call before it gets there.
- Contracts expire and must be rolled, and the roll has a cost set by the shape of the curve, not by your view.
- Multipliers vary widely between products — the loss per point on one contract is a fact to check before trading, not after.
A worked example
Long 1 E-mini S&P 500 (ES) contract at 5,800. Multiplier $50 per index point.
- Notional controlled
- $290,000 (5,800 × $50)
- Typical initial margin
- Roughly $20,000, about 7% of notional
- Value of a 1-point move
- $50
- Profit if ES rises to 5,900
- $5,000 (100 points × $50)
- Loss if ES falls to 5,700
- $5,000, payable as variation margin
Commissions, exchange fees, financing and the bid/ask spread are excluded. On a multi-leg position the spread is usually the largest of these. Margin requirements are set by the exchange and the broker and change with volatility.
Common questions
What happens at expiry?
Depends on the contract. Financially settled products like the E-mini S&P settle to cash against a final index value; physically delivered ones like crude oil require delivery. Most participants close or roll well before that — check the first notice date, not just expiry.
Can I lose more than my margin?
Yes. Margin is a performance bond, not the maximum loss. A large gap can produce a loss exceeding the account balance, and the deficit is a debt.
Related strategies
- Futures SpreadRelative value — non-directional
- Futures Calendar SpreadTerm structure — non-directional
- Covered Futures CallNeutral to mildly bullish — income on a futures position
- Futures Basis TradeArbitrage — carry capture
Educational only. This page explains how a structure behaves; it is not a recommendation to trade it. Options and futures carry substantial risk, and short and leveraged positions can lose more than the amount originally invested.