A futures contract is a legally binding agreement to buy or sell a specific asset at a set price on a specific future date. At Slay Markets, you trade futures as a derivative product: in practice, almost no trader takes or makes delivery of the underlying asset. Instead, you close your position before the contract expires and either profit or lose money based on how the price moved. Futures are leveraged, so you post only a small margin deposit rather than the contract's full value, which amplifies both gains and losses.
This article is a plain-language explanation of how futures contracts work and why traders use them on Slay Markets.
What are the parts of a futures contract?
Every futures contract traded on Slay Markets has four defining features: the underlying asset, the contract size, the expiration date, and the price.
The underlying asset — what the futures contract is based on: a stock index (like the S&P 500), a commodity (like crude oil or gold), a currency, or an interest rate.
The contract size — how much of the asset each futures contract represents. For example, one ES (E-mini S&P 500) contract represents a dollar value equal to $50 times the S&P 500 index price.
The expiration date — the date the futures contract expires. Most traders close or roll their positions before this date.
The price — the agreed-upon price at which the futures contract will settle. This changes constantly throughout the trading day as buyers and sellers trade.
How are futures different from stocks?
Stocks represent ownership in a company. Futures represent an agreement about a price — futures are a derivative product, meaning their value is derived from an underlying asset. Beyond ownership, futures and stocks differ on expiration, leverage, tax treatment, trading hours, and the pattern day trader rule.
Futures contracts expire, while stock shares can be held indefinitely. Futures have leverage built in (the margin you post is a fraction of the contract value), while stocks require a margin account to use leverage. Futures gains and losses receive Section 1256 tax treatment under the 60/40 rule, while stocks are taxed at standard capital-gains rates. Futures trade nearly 24 hours a day, Sunday through Friday, while stocks trade only during regular market hours. And the pattern day trader rule applies to stocks and equities but does not apply to futures.
| Futures | Stocks |
What you own | A contract (price agreement) | Shares (company ownership) |
Expiration | Yes — contracts expire | No — shares can be held indefinitely |
Leverage | Built in — margin is a fraction of contract value | Margin account required for leverage |
Tax treatment | Section 1256 — 60/40 rule applies | Standard capital gains rates |
Trading hours | Nearly 24 hrs, Sun–Fri | Regular market hours only |
Pattern day trader rule | Does not apply to futures | Applies to stocks/equities |
The FINRA pattern day trader (PDT) rule is an equities rule and does not apply to futures trading on Slay Markets. Futures traders are not subject to the $25,000 minimum account requirement that applies to pattern day traders in stocks. For the trading rules specific to futures, see the Margin Rules Overview and Order Types Reference.
How does leverage work in futures?
Futures are leveraged instruments. When you trade futures on Slay Markets, you do not pay the full value of the contract upfront — you post a margin deposit, which is typically a small fraction of the total contract value.
For example, if the ES (E-mini S&P 500) futures contract is trading at 5,000, each contract has a notional value of $250,000 (5,000 × $50 per point). But the intraday margin to hold one ES contract is $500 — a small fraction of the total. This means a small price move in the ES creates a proportionally large gain or loss on your margin deposit.
Leverage amplifies both gains and losses. A 1% move in the underlying asset can represent a 10x or greater percentage move relative to your margin deposit. Understanding your risk before placing a futures trade is essential.
How do futures contracts settle at expiration — cash or physical delivery?
When a futures contract traded through Slay Markets expires, it settles in one of two ways: cash settlement or physical settlement.
Cash settled — the profit or loss is calculated and credited or debited to your account in cash. No physical delivery occurs. Cash-settled contracts include the equity index futures ES, NQ, MES, MNQ, YM, MYM, RTY, and M2K, plus crypto futures such as BTC and ETH.
Physically settled — the underlying commodity is actually delivered to or received from the buyer. Physically-settled contracts include crude oil (CL), natural gas (NG), gold (GC), silver (SI), copper (HG), and grain contracts (ZC, ZS, ZW). Most retail traders close or roll these positions before expiration to avoid delivery.
Holding a physically-settled futures contract into its First Notice Day can trigger a delivery obligation. To avoid this, physically-settled contracts must be closed or rolled before the First Notice Day or the Last Trading Day, whichever comes first for that contract. For full details, see Contract Expiration — What Happens and What to Do.
What are micro futures contracts and how much is each point worth?
Most futures products on Slay Markets come in two sizes: a full-size contract and a smaller micro contract. Each micro contract represents one-tenth of the full-size contract value and requires proportionally less margin.
Each point of price movement is worth a fixed dollar amount per contract. For the S&P 500, the full-size ES is worth $50 per point and the micro MES is worth $5 per point. For the Nasdaq-100, the full-size NQ is worth $20 per point and the micro MNQ is worth $2 per point. For the Dow Jones, the full-size YM is worth $5 per point and the micro MYM is worth $0.50 per point. For the Russell 2000, the full-size RTY is worth $50 per point and the micro M2K is worth $5 per point.
Product | Full-Size | Micro |
S&P 500 Index | ES — $50 per point | MES — $5 per point |
Nasdaq-100 Index | NQ — $20 per point | MNQ — $2 per point |
Dow Jones Index | YM — $5 per point | MYM — $0.50 per point |
Russell 2000 Index | RTY — $50 per point | M2K — $5 per point |
Micro contracts allow traders to participate in futures markets with less capital and smaller per-tick risk. They are well-suited for new traders learning the mechanics before scaling up to full-size contracts.
Why do traders use futures?
Traders use futures on Slay Markets for three main purposes: speculation, hedging, and portfolio diversification.
Speculation — trading the price movement of an index, commodity, or other asset with futures, without owning the asset directly.
Hedging — using futures to offset risk in an existing portfolio. For example, an equity portfolio manager might sell ES futures to reduce exposure during uncertainty.
Portfolio diversification — futures provide access to asset classes (energy, metals, agriculture, interest rates) that are difficult to trade directly.
Frequently asked questions about futures contracts
Q: How much is one point worth on each index futures contract?
A: On Slay Markets, each point is worth a fixed dollar amount per contract: ES (S&P 500) is $50 per point and MES is $5 per point; NQ (Nasdaq-100) is $20 per point and MNQ is $2 per point; YM (Dow Jones) is $5 per point and MYM is $0.50 per point; RTY (Russell 2000) is $50 per point and M2K is $5 per point. Each micro contract is one-tenth the value of its full-size contract.
Q: How are futures taxed?
A: Slay Markets futures are Section 1256 contracts. Under the 60/40 rule, 60% of your net annual gains or losses are treated as long-term and 40% as short-term, regardless of holding period, and open positions are marked to market at December 31. This differs from stocks, which are taxed at standard capital-gains rates. Slay Markets provides official tax documents but does not provide tax advice; consult a qualified tax professional or CPA.
Q: What hours can I trade futures?
A: Most futures markets trade nearly 24 hours a day, Sunday through Friday, with a brief daily maintenance break; agricultural products have shorter sessions. This is far longer than stock market hours, which are limited to regular market hours.
Q: Does the pattern day trader (PDT) rule apply to futures?
A: The FINRA pattern day trader rule was an equities rule and never applied to futures trading. It has also been eliminated for equities — as of June 4, 2026, the SEC approved FINRA's removal of the PDT designation, the $25,000 minimum equity requirement, and the four-trades-in-five-days counter. Neither the old PDT rule nor its $25,000 minimum has any bearing on trading futures through Slay Markets.
Q: Will I have to take delivery of the underlying asset?
A: For cash-settled futures (such as ES, NQ, MES, MNQ, YM, MYM, RTY, M2K, BTC, and ETH), no physical delivery occurs — the cash gain or loss is credited or debited to your account. For physically-settled futures (such as CL, NG, GC, SI, HG, ZC, ZS, and ZW), holding a contract into its First Notice Day can trigger a delivery obligation, so you must close or roll the position BEFORE the First Notice Day. Most traders close or roll well before expiration.
Key takeaway: what is a futures contract?
A futures contract is an agreement to buy or sell an asset at a set price on a future date, traded on Slay Markets as a leveraged derivative product. Because your margin deposit is only a fraction of the contract's total value, futures amplify both potential gains and losses. Most traders close their positions before expiration rather than taking or making delivery of the underlying asset.
Related Articles
Contract Expiration — What Happens and What to Do — how cash-settled and physically-settled futures expire and the First Notice Day delivery deadline.
How Rollovers Work — how to move a position from an expiring contract to the next.
Margin Rules Overview — intraday and overnight margin requirements for futures contracts.
Order Types Reference — the order types you can use to enter and exit futures trades.
Products and Contracts Offered — the full list of futures products available on Slay Markets.