How a futures trade works: contracts, points, ticks, and dollars.

From a price move to a dollar result

You open a trading platform.

The price moves from twenty thousand to twenty thousand and ten.

That’s a ten-point move.

But how much money is that?

Ten dollars? Twenty dollars? Two hundred?

The chart alone doesn’t answer that question.

To understand what the movement means for your position, you need three things:

Which contract are you trading?

How many contracts do you hold?

And did the price move with your position or against it?

Let’s connect those pieces.

The contract: NQ

For this example, we’ll use E-mini Nasdaq-100 futures.

That’s a long name. Its product symbol is NQ.

It’s a futures contract tied to the Nasdaq-100 stock index.

The Nasdaq-100 tracks the performance of 100 of the largest non-financial companies listed on the Nasdaq stock exchange. Think of it as a combined measure of that group’s stock performance, with larger companies generally having more influence on the number.

There are also smaller contracts tied to the same index.

The Micro E-mini, called MNQ, is one-tenth the size of NQ. The E-nano, called NNQ, is one-hundredth the size of NQ.

We’ll explain E-mini, Micro, and E-nano contracts—and what those size differences mean—in a separate video.

For this example, we’ll stay with NQ.

For one NQ contract, a one-point price change produces a twenty-dollar change in the position’s value.

That relationship comes from the contract’s specifications.

It applies whether the movement helps you or hurts you.

Points and ticks

A point is one whole unit in the quoted price.

If the price moves from twenty thousand to twenty thousand and one, it has moved one point.

If it moves from twenty thousand to twenty thousand and ten, it has moved ten points.

The price on this chart is quoted in index points.

It isn’t a dollar price you pay outright to purchase the contract.

That distinction matters.

Seeing “twenty thousand” on the screen doesn’t mean you hand over twenty thousand dollars to open one NQ position.

We’ll explain the money required to open it shortly.

First, let’s make the price movement smaller.

The quoted price can move in fractions of a point.

For an ordinary NQ trade, the minimum price increment is one quarter of a point.

That’s called a tick.

Imagine a staircase.

Each step is one tick:

Twenty thousand.

Twenty thousand point two five.

Twenty thousand point five zero.

Twenty thousand point seven five.

Twenty thousand and one.

Four quarter-point steps make one whole point.

So, for this contract:

One tick is a quarter of a point.

Four ticks make one point.

And because a whole point is worth twenty dollars per contract, each quarter-point tick is worth five dollars.

That dollar amount is called the tick value.

A complete long trade

Now let’s make a hypothetical trade.

You buy one NQ contract at twenty thousand.

You’ve opened a long position.

A rising price benefits that position. A falling price works against it.

Suppose you later sell to close at twenty thousand and ten.

You bought at twenty thousand and sold ten points higher.

Ten points, multiplied by twenty dollars per point, multiplied by one contract.

That’s a two-hundred-dollar gain before trading costs.

Now change the outcome.

You buy at twenty thousand, but close at nineteen thousand nine hundred and ninety.

The price moved ten points against your long position.

That’s a two-hundred-dollar loss before costs.

Same contract. Same size of movement. Opposite result.

Position size

Suppose you hold three NQ contracts instead of one.

Each contract still has the same point value.

But now the movement affects three contracts.

A ten-point move in your favor produces:

Ten points, multiplied by twenty dollars, multiplied by three contracts.

That’s six hundred dollars before costs.

A ten-point move against you produces a six-hundred-dollar loss before costs.

Increasing the number of contracts increases both sides of the outcome.

It doesn’t make your prediction more likely to be correct.

Short positions

You can also open a futures position by selling first.

That’s a short position.

Suppose you sell one NQ contract at twenty thousand, then buy to close at nineteen thousand nine hundred and ninety.

You sold higher and bought back ten points lower.

That’s a two-hundred-dollar gain before costs.

But if you sell at twenty thousand and buy to close at twenty thousand and ten, the rising price works against you.

That’s a two-hundred-dollar loss before costs.

For a long position, rising prices help and falling prices hurt.

For a short position, falling prices help and rising prices hurt.

The contract’s point value stays the same.

Open results and daily settlement

While the position is open, its gain or loss changes with the market.

You’ll often hear this described as unrealized profit or loss.

If your position is showing a two-hundred-dollar gain, that number can change before you exit.

Closing the position fixes the trading result from your entry and exit prices, before costs.

There’s also an important futures-accounting detail: open positions undergo daily settlement, which can move gains and losses into or out of the account even while the position remains open.

We’ll give that process its own explanation later.

For now, don’t confuse an open position’s displayed result with a completed trade.

Margin and notional value

To open a futures position, your account must meet a margin requirement.

Margin is collateral supporting your obligations.

It isn’t the full value of the exposure, and it isn’t your maximum possible loss.

Let’s return to our hypothetical price of twenty thousand.

One NQ contract has a multiplier of twenty dollars per index point.

Twenty thousand multiplied by twenty gives four hundred thousand dollars.

That’s the contract’s notional value—a measure of the exposure it represents at that price.

It doesn’t mean every price movement gains or loses four hundred thousand dollars.

We already calculated that a ten-point movement changes one contract’s value by two hundred dollars.

The notional value and the gain or loss are different measurements.

The margin required to support that exposure is another measurement again.

Margin requirements depend on the product, market conditions, and your broker’s rules. They can change.

We aren’t using a specific margin figure here because it isn’t a permanent property like the contract multiplier.

Leverage and risk

When the required collateral is smaller than the exposure you’re taking, you’re using leverage.

Leverage means a price change can have a large effect relative to the capital supporting the position.

It doesn’t change NQ’s twenty-dollar point value.

It changes the relationship between your exposure and your capital.

That’s why the amount required to open a position shouldn’t be treated as the amount you could lose.

Losses can exceed your initial deposit.

And being permitted to open a position doesn’t establish that its risk is appropriate for your account.

Actual fills and trading costs

Our examples used exact entry and exit prices and calculated results before costs.

Real trades include commissions and applicable fees.

Your actual execution price can also differ from the price you expected. That difference is often called slippage.

If you expected to buy at one price but were filled higher, that affects your result.

So when reviewing a trade, use the actual fills and include the costs.

A chart showing a favorable move isn’t enough to calculate what someone earned.

What you should understand now

The price movement becomes a dollar result through the contract’s value per point and the number of contracts.

The direction of your position determines whether that movement helps or hurts you.

Points measure price movement.

Ticks measure the minimum price increments.

Margin supports the position’s obligations.

Leverage describes the relationship between exposure and capital.

These ideas work together, but they aren’t interchangeable.

Before placing a trade, you should be able to explain what the contract represents and calculate what a movement would mean for your position.

That still leaves another question:

How do you tell the platform what you want it to do?

In the next lesson, we’ll explain orders—how traders request an entry or exit, and why the type of order matters.