Futures contracts are agreements to buy or sell an asset, such as oil or gold, at a set price on a specific date in the future. Futures are primarily traded on exchanges, with standardised terms and expiration dates, making them suitable for long-term strategies and hedging in asset classes such as commodities.
However, futures can also be traded in CFD form as derivatives (see below), which is how you’ll trade them using our platform. Below, you’ll see a Crude Oil future CFD with March expiry resulting from a market search.
Futures CFD trading example
Say you want to trade US Crude, currently priced at $50, to secure a purchase price amid expectations of a potential price increase. In January, you buy a March US Crude futures CFD at $50, speculating that prices will rise before expiry.
- If the price rises to $55 by the March expiry (or when you close the position), your CFD gains value. In this case, your profit is the $5 difference ($55 - $50) multiplied by your contract size.
- If the price falls to $45, your position incurs a $5 per contract loss, as the market price has dropped below your entry price.
Conversely, you can go short on the future if you think the price will fall before expiry. Then, if the price rises before expiry, your CFD loses value, and if the price declines, your CFD will profit.