What are futures contracts?
From crude oil to the S&P 500, futures contracts let traders and investors gain exposure to a wide range of markets without necessarily owning the underlying asset.
Futures are exchange-traded, which means they are standardised and cleared through a central exchange such as the Chicago Mercantile Exchange (CME) or ICE Futures Europe. This standardisation makes them highly liquid and transparent.
Key terms to know
Underlying asset - The commodity, index, currency, or financial instrument the contract is based on
Contract size - The standardised quantity covered by one futures contract (e.g.: 1,000 barrels of crude oil)
Expiry date - The date on which the contract either settles or must be rolled over
Futures price - The agreed price for the future transaction, which fluctuates in real time
Settlement - Either physical delivery of the asset, or cash settlement based on price difference (cash is the overwhelming settlement method).
Types of futures contracts
Futures contracts exist across a broad range of markets. Here are the main categories you can trade.
Type | Examples | Common use |
Equity index futures | S&P 500, FTSE 100, Nasdaq 100 | Speculating on or hedging stock market direction |
Commodity futures | Crude oil, gold, natural gas, wheat | Price risk management for producers; speculation for traders |
Currency futures | EUR/USD, GBP/USD, JPY | Hedging foreign exchange exposure |
Interest rate futures | US Treasuries, Eurodollar, Gilts | Managing interest rate risk; macro speculation |
Crypto futures | Bitcoin futures (CME), Ethereum futures | Speculating on crypto prices without holding the asset |
Single-stock futures | Individual company shares | Leveraged exposure to individual equities |
How to trade futures with us
Trading futures with IG gives you access to a wide range of markets through spread bets and CFDs, meaning you do not need to deal directly with a futures exchange or worry about physical delivery.
Here is how it works, step by step:
1. Open an account - Create and verify your IG account. You can also practice with a free demo account first, using virtual funds to hone your skills in a less risky environment.
2. Choose your market - Search for the futures market you want (e.g.: US 500 for S&P 500 futures exposure).
3. Decide your position size - With spread bets, you trade in pounds per point; with CFDs, you trade in contracts.
4. Set your risk management - Use stop-loss orders and take-profit orders to manage downside risk, and ensure that positions are closed at predetermined levels.
5. Monitor and manage - Keep an eye on margin requirements and expiry dates, ensuring that you roll over or close positions before expiry.
When you trade futures via IG, you are trading on the price of the futures contract rather than entering the exchange-traded contract itself. This means you can trade on margin, go long or short, and choose between spread bets (which can be tax-efficient for eligible UK traders) and CFDs.
These instruments use leverage, which means that losses can outweigh your initial deposit. This makes effective risk management essential.
Not ready to go live just yet, but keen to get going? Our demo account lets you practice with virtual funds, and therefore no real capital at risk.
Futures vs CFDs vs spread betting
When trading futures price movements in the UK, you have three main vehicles. Understanding the differences helps you choose the right approach for your goals.
Feature | Futures contracts | CFDs | Spread betting |
|---|---|---|---|
Trading venue | Centralised exchange | OTC / broker | OTC / broker |
Expiry date | Fixed (quarterly) | Usually none | Usually none |
Contract size | Standardised | Flexible | Flexible (£/point) |
Settlement | Physical or cash | Cash only | Cash only |
UK capital gains tax | May apply | May apply | Normally exempt* |
Access via IG |
*Spread betting profits are normally exempt from UK capital gains tax and stamp duty, however tax laws can change. Tax treatment depends on individual circumstances.
How does margin work in futures trading?
Futures are leveraged instruments, which means you only need to deposit a fraction of the total contract value to open a position. This deposit is called margin.
There are two types of margin to understand:
Initial margin - The amount required to open a position. This is typically a small percentage of the contract's notional value.
Maintenance margin - The minimum balance required to keep your position open. If your account falls below this level, you will receive a margin call, requiring you to deposit more funds or close part of your position.
As mentioned previously, leverage amplifies losses (as well as profits). If the market moves against you, losses can exceed your initial deposit. This is why risk management, including stop-loss orders, is essential when trading futures. However, retail traders benefit from negative balance protection under UK law, meaning that we are obligated to return your balance back up to zero as soon as possible – at no cost to you. This protection, however, doesn't apply to professional traders.
When trading futures with us, margin rates vary by market and are displayed clearly before you open a trade.
Futures trading strategies
Futures can be used in multiple ways - from hedging an investment portfolio to making directional trades on price movements.
1. Speculation
Traders speculate on whether a futures price will rise or fall. Going long (buying) means you expect the price to increase; going short (selling) means you expect it to fall. Leveraged exposure means even small price movements can have a significant effect on your P&L.
2. Hedging
Producers, exporters, and investors use futures to protect against unfavourable price moves. An oil producer, for example, might sell crude oil futures to lock in a price and reduce the risk of falling oil prices before their product reaches market. Similarly, a UK investor holding US equities might use S&P 500 futures to hedge against a market downturn.
3. Spread trading
Spread trading involves simultaneously buying one futures contract and selling another on the same or related market. The trader profits from the change in the price difference between the two contracts rather than the absolute price level. This means the position is largely insulated from broad market moves. In other words, if both contracts rise or fall together, the spread trader is relatively unaffected. What matters is whether the gap between the two prices widens or narrows in the direction they anticipated.
The two contracts involved are typically referred to as the 'legs' of the spread. These might be the same asset with different expiry dates (known as a calendar spread), two related but distinct assets such as crude oil and natural gas (an inter-commodity spread), or the same asset trading on different exchanges. Each variation carries its own risk profile and is suited to different market conditions and trading objectives.
Because the two legs tend to move in the same direction, the net exposure is lower than holding an outright position. This strategy can therefore reduce margin requirements and overall market risk, making spread trading a popular approach among more experienced traders looking to manage volatility while still capitalising on relative price movements.
Some retail traders start with speculation. But futures were built for hedging, and understanding that changes how you think about them.
Futures expiry and rolling over positions
Every futures contract has an expiry date. In other words, the date on which the contract must be settled or closed. For traders who want to maintain exposure beyond this date, the position needs to be rolled over.
Rolling over means closing the expiring contract and simultaneously opening a new contract with a later expiry date. The cost or benefit of rolling depends on the relationship between the spot price and the futures price - a concept known as the basis. There are key differences between futures and forwards, which we cover in this guide.
There are two important pricing concepts to keep in mind:
Contango - when the futures price is higher than the spot price. Rolling typically incurs a cost in contango markets (common in oil and commodities). Contango tends to occur when storage costs, insurance, or financing costs are factored into the future price, or when near-term supply is plentiful. Over time, this can meaningfully drag on returns for investors who repeatedly roll their positions forward.
Backwardation - when the futures price is below the spot price. Rolling may generate a benefit in backwardated markets (sometimes seen in energy markets during supply crunches). Backwardation often signals tight near-term supply or strong immediate demand, pushing the spot price above what the market expects in the future. In this environment, rolling contracts can provide a tailwind to returns rather than a cost.
When you trade futures with us, expiry dates and roll information are displayed on the platform. You can choose to roll your position or let it expire.
Futures trading hours
One of the advantages of futures markets is their near-24-hour trading availability during weekdays. Trading hours vary by market.
Market | Exchange | Approxiate trading hours (UK time) |
S&P 500 futures | CME | Sun 11pm - Fri 10pm (nearly 24h) |
Nasdaq 100 futures | CME | Sun 11pm - Fri 10pm (nearly 24h) |
FTSE 100 futures | ICE Futures Europe | Mon - Fri, 8am - 9pm |
Crude oil (WTI) futures | CME/NYMEX | Sun 11pm - Fri 9:30pm |
Gold futures | CME/COMEX | Sun 11pm - Fri 10pm |
Hours above are approximate and may vary. Check the exact trading hours for each market before opening a position.
What is futures trading?
Futures trading involves buying and selling standardised contracts that obligate you to transact a specific asset at a predetermined price on a future date. Unlike spot markets, you are agreeing to a transaction in the future, not right now.
A futures contract specifies an underlying asset, a contract size, a price, and an expiry date. The price fluctuates in real time as the market views on supply, demand, and risk change. Traders profit or lose based on the difference between their entry price and the price at which they close or the contract settles.
Yes. UK traders can access futures markets directly via regulated exchanges or through derivatives providers like IG, which offers futures exposure through spread bets and CFDs. IG is authorised and regulated by the Financial Conduct Authority (FCA).
Futures are exchange-traded contracts with fixed expiry dates and standardised sizes. CFDs (contracts for difference) are over-the-counter (OTC) agreements between you and a broker, usually with no fixed expiry. Both instruments are leveraged; the main difference is where and how they trade. You may also want to compare futures vs options.
Trading hours vary by market. US index futures (S&P 500, Nasdaq) trade almost 24 hours on weekdays via the CME. UK FTSE 100 futures trade during European hours on ICE. Check IG's platform for precise hours for each market.
A margin call happens when your account balance falls below the maintenance margin level required to keep your position open. Your broker will ask you to deposit more funds. If you do not, your position may be closed automatically. Margin calls are more likely in volatile markets with large leveraged positions.
Contango is when the futures price is higher than the expected future spot price, typically reflecting the cost of storage and carry. In contango markets, rolling a long futures position to the next contract period can incur a cost.
Profits from trading futures directly may be subject to UK capital gains tax. If you trade futures exposure via spread betting with IG, profits are normally exempt from capital gains tax and stamp duty. Tax treatment depends on individual circumstances and may be subject to change. Seek independent advice.
