Futures Investing Basics

A futures contract is a legally binding agreement to buy or sell a standardized asset at a predetermined price at a specified time in the future. Typically, futures contracts are traded electronically on exchanges such as CME Group, which is the largest futures exchange in the U.S.....

Many futures contracts—such as those based on crude oil, gold, soybeans, and more—have origins quite literally at ground level (or below ground). What futures markets do over the short- and long-term can tell investors a lot about what’s going on in the world (how much it will cost to fill your gas tank before your summer road trip, for example).

All futures contracts are “standardized,” and spell out certain specifications, including:

Quality and quantity of a commodity

Unit pricing of the asset and minimum price fluctuation (tick size)

Date and geographic location for physical “delivery” of the underlying asset (but actual physical delivery rarely happens, as most contracts are liquidated before the delivery date). TD Ameritrade does not allow for physical delivery of the underlying asset.