What does it actually take to hold a commodity through futures?

Futures are the most direct route to commodity exposure — you choose the grade, the delivery point and the month. They are also the route with the most operational demands, and the ones that surprise people are not the ones they expect. Margin and mark-to-market arithmetic get their full treatment in Initial and maintenance margin; the surprises below are the ones peculiar to a physical good.

Surprise one: the contracts are enormous

Futures contracts were designed for commercial users, and their sizes reflect the businesses that use them, not the individuals who later wanted exposure.

A tick is the smallest increment the contract is allowed to move, and on its own it looks harmless. What fills or empties an account is the number of them. A $1.00 move in crude is 100 ticks — $1,000 on one contract; a 10-cent move in gas is also $1,000; a 1-cent move in corn is 4 ticks, or $50; a $10 move in gold is $1,000; a $100 move in copper is $2,500. (Those are outright ticks — spread trades can tick finer.)

A single gold contract carries more notional exposure than most retail accounts hold in total. Exchanges responded by listing micro and mini contracts — Micro WTI at 100 barrels, micro gold at 10 ounces — precisely because the standard sizes exclude nearly everyone who is not a commercial user.

Surprise two: the position has an expiry, and a physical obligation behind it

A share can be held indefinitely. A futures contract cannot. Each one has a last trading day, and for many physically delivered contracts — CBOT grains and LME metals among them — there is an earlier and more important date: First Notice Day, the first day on which a short can serve notice of intent to deliver. The order is contract-specific and worth checking: WTI crude terminates trading before its delivery period opens, so its last trading day is the deadline that binds.

Anyone without a tank at Cushing, a silo on the Illinois river or an LME warehouse account must be flat, or rolled into a later month, before that date. Brokers generally enforce this by liquidating positions automatically, but the obligation is real and it is the reason commodity futures require a calendar in a way that equities never do.

Surprise three: rolling is not administrative

Holding exposure for a year means roughly twelve exits and twelve entries. Each time, you sell the expiring contract and buy the next one — and the price difference between them lands in your result. Depending on the shape of the curve, that difference can add to your return or subtract from it, month after month, entirely independently of what the commodity price does.

This is the single largest reason long-horizon commodity results diverge from the spot chart. The Derivatives domain builds the arithmetic of carry, contango, backwardation and roll properly; the next lesson shows what it does to a fund.

The case that made all of this concrete

On 20 April 2020, the expiring May WTI contract settled at −$37.63 a barrel.

The mechanism was purely physical. Demand had collapsed, production had not, and storage at Cushing was close to full. Anyone still holding a long position into expiry faced taking delivery of crude oil into tanks they could not rent at any price, because what uncommitted capacity remained at Cushing was already leased. Rather than accept that obligation, holders paid to be released from it — and the price went through zero.

Two lessons sit inside that number, and both matter more than the spectacle:

• A physically delivered commodity future is a claim on a physical thing, at a physical place, on a physical date. The moment leasable storage at that place ran short, the abstraction stopped working and the physical constraint reasserted itself instantly.
• "The price cannot go below zero" was an assumption about storage, not a fact about arithmetic. Several retail products tracking oil were badly damaged in the same week, and some contracts and risk systems had to be reprogrammed because they could not represent a negative price.

What this route actually gives you

Stated neutrally, so the trade-off is visible:

• Precision — you specify the grade, the delivery point and the month. No other wrapper lets you do that.
• Capital efficiency — you post a fraction of notional as margin, which is exactly why the position must be monitored daily.
• Operational load — margin calls, expiry calendars, first notice days, roll decisions. This is a position that requires attention on a schedule, not a holding you can forget about.

Whether that trade-off suits any particular person is not something this course decides. Knowing what the route mechanically involves is.

In the data

The expiry lives inside the symbol. In the contracts below, CLZ27-NYM reads as crude (CL), December (Z, in the exchanges' month-letter code), 2027 (27), on NYMEX (NYM).

What is not there is the calendar. The venue record below gives opening hours and five working days for every commodity future at once, and nothing about any single contract.

First notice day and last trading day have to come from the exchange's own contract calendar; no price series carries them.

Try it now

1. A year of COMEX gold is below, as candles. Find the tallest bar — the widest high-to-low range in the window — and Measure across it. Multiply that move by the contract size above: one session, one contract, that much cash.

2. Compute the notional value of two COMEX gold contracts at $2,400/oz. (2 × 100 × 2,400 = $480,000.) Then find the exchange's current initial margin for one contract on the CME Group site and note the ratio of notional to margin; the lesson prints no margin figure because the exchange changes it.
3. Write down the difference between last trading day and first notice day in one sentence each, and say which one matters more to somebody with no warehouse.