What is a Futures Contract?
A Future is a contract between two parties to buy or sell a specific commodity or financial instrument at a pre-determined price on a particular future date.
Futures contracts can be based on a variety of underlying assets, from traditional commodities like corn and wheat to different asset classes, such as government bonds, interest rates, energies and stock indices.
As highly liquid exchange-traded financial instruments, Futures can be traded on tight spreads. They incur low transaction costs, and pricing is transparent due to the level of specificity found in Futures Contracts, as well as the regulations imposed by the various exchanges.
No physical delivery
The underlying security cannot be physically delivered on expiry of a Futures Contract. On or before the expiry of a Futures Contract, Saxo Bank will cash settle a client's positions on their behalf. Read more about expiry of Futures.
Futures trade on margin
As Futures contracts are essentially an agreement to buy or sell a certain asset at a given future date, actual payment does not occur prior to the trade. Instead, buyers and sellers of Futures must commit trade collateral. This is also known as "margin".
The size of the margin is determined by the Futures exchange and is the same for all traders. Depending on the asset traded, you can expect a requirement of approximately 1%-10% margin.
Use your Stock portfolio as margin
Giving you the extra flexibility to manage your portfolio, Saxo Bank allows you to use the value of your Stocks as collateral for margin trading. Thus you have the agility to seize your trading opportunities. See all Futures Trading Conditions
Trade Contract Options with Saxo Bank
Our Futures offering is complimented with access to the world’s most liquid exchange listed options contracts. We call them Contract Options – a great alternative to Futures trading.
Both Contract Options and Futures are listed on derivatives exchanges and enable you to trade the world’s most liquid markets, such as currencies, indices, commodities etc.
Read more about Contract Options.