What exactly are you agreeing to when you buy one contract?
"I bought one contract" carries no information until you know the specification. The spec is the machine that converts a price quote into money, and getting it wrong is the fastest way to be surprised by your own position size.
The five fields that matter
Underlying. Defined to an almost pedantic degree. Not "oil" but 1,000 barrels of light sweet crude, deliverable at Cushing, Oklahoma, meeting stated sulphur and gravity limits. The precision exists so that every contract really is identical.
Contract size (or multiplier). How much underlying one contract represents. Crude: 1,000 barrels. Corn: 5,000 bushels. Gold: 100 troy ounces. For an index future there is nothing physical at all, just a multiplier — the E-mini S&P 500 is $50 per index point.
Tick size and tick value. The smallest permitted price increment, and what it is worth. Crude ticks in $0.01, and one tick on 1,000 barrels is $10. The E-mini S&P ticks in 0.25 index points, and one tick at $50 a point is $12.50.
Delivery month. The calendar of listed contracts. Financial futures usually run quarterly (March, June, September, December). Crude lists every month for years out. Corn follows the crop cycle. Each month is a separate, separately-priced contract.
Settlement type. Physical delivery or cash settlement — the subject of the next lesson.
The arithmetic that falls out
Notional value = price × contract size. This is what your contract actually controls.
- Crude at $80.00 → 1,000 × 80 = $80,000 per contract
- E-mini S&P at 5,000 → 50 × 5,000 = $250,000 per contract
- Gold at $2,000 → 100 × 2,000 = $200,000 per contract
P&L per unit of price move follows immediately. A $1.00 move in crude is 100 ticks, so $1,000 per contract. A 20-point day in the S&P is $1,000 per E-mini contract. You never need a calculator for the direction, only for the size.
A worked example
You are long 3 crude contracts and the price moves from $80.00 to $80.35.
- Move: $0.35 = 35 ticks
- Per contract: 35 × $10 = $350
- Three contracts: $1,050
Now look at what produced it. Those three contracts control 3 × $80,000 = $240,000 of crude. A move of 0.44% generated $1,050. Hold that ratio in your head, because Unit 2 is entirely about what the same ratio does when the sign flips.
Micro contracts exist, and size is the whole game
Exchanges list smaller versions of most major contracts — micro crude at 100 barrels, micro E-mini at $5 per point. The mechanics are identical; only the zeros change. That is worth stating plainly because the single most consequential decision in any futures market is not direction, it is how many contracts — and the spec sheet is where that decision is actually made.
This is a description of how the instrument is built. It is not a suggestion to trade one.
In the data
A price series keeps almost nothing of the specification. The table below is the published cash price of WTI crude at Cushing, Oklahoma: a name, a unit, and one number a month.
There is no contract size, no tick and no delivery month anywhere in it. Only the unit survives, and it is the part to read first: crude is quoted per barrel, corn per bushel, gold per troy ounce, so a spread or ratio between two commodities means nothing until both units are known. Note the frequency too. This series is a monthly average, while the chart in the exercise below is the front futures contract day by day; the two are different prices and do not line up date for date.
Try it now
- Read today's price off the chart below. Note what the axis is denominated in before you multiply anything by it: this one is dollars per barrel, and a spec sheet that says 1,000 barrels is the other half of the sentence.
- Multiply the two. That is the notional one single contract represents. Is it larger than you expected?
- Measure a 1% move on the chart and convert it to dollars per contract. That figure — not the headline price — is what you would actually be exposed to.