Futures contract [beginner quick help]
I understand the basics of how the futures work but couldn't understand based on a practical sense as a speculator.
"A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future."
When you go to the CME, all it shows is a bunch of points for each contract. Where is the information on the actual contract itself? Don't I need to know the "predetermined price" to set my limit?
Thank you
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You can see the details on the "contract specs" tab of the CME quotes page, but there is one misunderstanding that must be cleared up.
You don't choose the price of a futures contract - you enter into a contract at whatever the "market "price" for that contract is. So when you see a quote of 2,870 "points" for S%P 500 futures expiring in JUN 2020, you are entering into a contract to "buy" the S&P 500 index for 2,870. In reality, though, you can't practically buy the index, so they are financially settled, and when the contract settles you will get (pay) 0 (the contract size from the specs) for every point that the S&P 500 finishes above (below) 2,870 on the expiry date.
So you don't pay anything upfront, and must enter in at the current market price - as more people buy (sell) futures, the futures price will go up (down).
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