Futures trades are useful if you can see into the future…
A futures spread bet has a set expiry date that is normally within the next month or quarter.
With a Futures Spread BetFrom a ‘trading cost’ point of view, futures trades are useful if you want to keep a trade open for 1 to 3 months (for monthly futures) and 1 to 6 months (for quarterly futures).
If you want to take a longer-term position then spread bets and CFDs are probably the wrong products.
You are probably better off using a lower cost and unleveraged product like an ETF.
With some platforms the type of market isn’t that clearly labelled. However, you can normally tell a futures contract because it has the expiry month of the trade in the name of the market, e.g. Brent crude oil (Aug).
Warning: Expiry Months Can Be MisleadingThe expiry month and the actual expiry date can vary!
The name of expiry month is only a guide, check the actual date.
E.g. in the screenshot below, looking at the US Light Crude – Future (Sep), you can see this is the September US crude oil market.
However, in the market information, Financial Spreads confirm the expiry of 21 August 2017.
This isn’t an arbitrary date, you can see they base the name of the market, and the expiry, on the official CME expiry date, i.e. when the underlying market expires.
Note, like the screenshot below, the spread betting platform might show the local UK time of the expiry, the CME date/time will be based on the local US time.
If in doubt, just check the expiry date on your spread betting platform.
Daily TradesMost spread bets are not Futures or Forwards markets but daily spread bets / daily funded bets.
These tend to be more popular for short term trades because of the lower trading costs.
Also see our guide to daily spread bets / daily funded bets.
What is a Forward Bet?This is the same as a Futures bet (see above).
You often see “Forward Bets” on the IG platform, other platforms use the term “Futures” to mean the same thing.
Commodities FuturesMost soft (agricultural) and energies commodities markets still operate as Futures (Forwards) market because this is how the underlying market is priced.
The exceptions tend to be gold and silver which are increasingly priced as a daily markets.
Forex FuturesWith spread betting and CFDs, nearly all forex markets are priced as daily markets. It’s rare you’ll find a forex futures market.
Also see, how to spread bet on forex.
Stock Market FuturesSome stock market indices are available as both “Daily Cash” (aka “Rolling Daily”) and Futures markets e.g.
However, given how few trades are futures/forward trades, I would expect many firms to stop offering these markets.
The Cost of Rolling Over a Futures Spread BetWith most platforms, you simply pay half the spread of the market to rollover a futures trade.
IG no longer offer the above discounted rollover on futures markets. With IG, if you want to roll a futures trade over from one period to the next then you pay the full price of closing the trade to the mid-point (i.e. half the spread)… AND the full price of opening the new trade (i.e. whole spread).
Don’t let this put you off too much. This rollover cost impacts a miniscule number of trades.
Also, as discussed above, if you are constantly holding futures trades and wanting to roll them then spread bets might not be right type of product.
ETFs could be a better option for your long-term trading.
Remember: Spread betting, CFDs and forex trading carry a high level of risk. You can lose more than your initial investment. These products are not suitable for all investors. Only speculate with money that you can afford to lose. Make sure you fully understand the risks involved and seek independent financial advice where necessary.