Futures contract — A standardised exchange-traded agreement to buy or sell an asset at a set price on a future date.
How futures contract works in prop trading
A futures contract standardises everything except price: the underlying, the quantity, the tick increment, and the expiry are all fixed by the exchange, so buyers and sellers only negotiate price. That standardisation is what makes futures the dominant instrument in retail prop trading — the risk of a position is arithmetic, not a matter of interpretation.
For a prop trader the practical consequence is that risk per contract is knowable in advance. Tick size times tick value times contracts gives you your dollar risk for any stop distance, which is exactly what you need to size against a fixed drawdown allowance. Nothing about a prop account changes contract specifications; what changes is how many you are permitted to hold.
Key points
- Contract specifications are set by the exchange and identical for every participant.
- Dollar risk per contract is fully determined by tick size, tick value, and your stop distance.
- Prop firms do not change specifications — they cap how many contracts you may hold.
- Every contract has an expiry, so positions must be rolled or closed before it.
Also known as
- futures
- contract
- futures product
Frequently asked questions
What futures contracts can I trade at a prop firm?
Most futures prop firms permit the CME equity index, energy, metals, and interest rate products, plus their micro equivalents. Some restrict thinly traded products, and many exclude or limit crypto futures. The permitted list is published per firm.
Do I own the underlying asset when I trade futures?
No. Financially settled contracts never deliver an asset, and physically deliverable ones are closed or rolled before delivery by virtually all retail traders. Prop firms require accounts to be flat well before any delivery process begins.
Put this into practice
Futures contract is described here as a plain-language educational definition. Firms, platforms, and account programs may apply different conditions or calculations. Verify the current official terms before using this definition to make an account decision.