Contract specification
The exchange-published definition of a contract: what is delivered, how much of it, in which months, with what minimum price increment and settlement method.
Specifications change. Always confirm against the exchange's own contract page rather than a third-party summary, this site included.
Tick size and tick value
The minimum price increment a contract can move in, and the currency amount that increment is worth per contract.
These two numbers are what convert a chart into money, and they differ for every instrument. Assuming a tick value from a similar-looking contract is one of the more expensive beginner mistakes.
Notional value
The full market value of what a contract controls, as opposed to the margin required to hold it.
The gap between the two is leverage. Position size expressed in contracts conceals it; position size expressed in notional does not.
Margininitial and maintenance margin
The deposit required to open a futures position, and the lower balance below which the account must be topped up.
Futures margin is a performance bond, not a loan or a down payment. Exchanges raise it when volatility rises, which can force position reductions at the least convenient moment.
Mark to marketdaily settlement
The daily process by which open positions are revalued at the settlement price and gains or losses moved between accounts in cash.
This is the mechanism that makes the clearing house's guarantee workable. It also means a futures loss is realised daily whether or not the position is closed.
Settlementphysical and cash settlement
How a contract is discharged at expiry: by delivering the underlying, or by exchanging the cash difference against a final reference price.
Holding a physically settled contract past its last trading day creates a delivery obligation. This is not theoretical, and brokers generally liquidate such positions beforehand.