When it comes to trading, futures and options are two of the most popular instruments, but they function very differently. Many traders get caught up in options trading, dealing with Greeks, time decay, and premium fluctuations, only to realize that even if they predict the right move, they might still end up with little to no profit.
On the other hand, futures trading simplifies everything—there are no Greeks, no time decay, and the only thing that matters is getting the direction right.
Unlike stocks, where you need to maintain a Pattern Day Trader (PDT) rule if your account is under $25,000, futures have no PDT rule, meaning you can day trade as much as you want with smaller capital.
How Futures Trading Works
In futures, when you identify a bullish setup, you go long at a specific price. For example, let’s say:
📌 You buy ES futures at 5749.5
📌 Your target is 5759.5 (10 points move)
📌 Each ES point = $50 per lot
That means:
✅ If price hits your target, you make $500 per lot
✅ If you trade 2 lots, you make $1,000 on that move
Similarly, your risk is predefined. If you place your stop-loss 2 points below entry and use 2 lots, your max loss is:
❌ $200 total loss (2 points × $50 × 2 lots)
There are no surprises—you know your risk and reward before entering the trade.
Similarly when you identify a bearish setup, you go short at a specific price and the calculations are just same as above, only this time futures price has to go down for your profits and go up for your stop.
Why Futures Trading Solves the Time Decay Problem
One of the biggest frustrations in options trading is time decay. If you enter a trade expecting a quick move but the market takes its time, your options premium decays, even if price eventually reaches your target. This means:
- Your profit shrinks if the market moves slowly
- If trading short-term contracts, you could end up in a loss despite hitting the target
With futures, time is irrelevant—whether it takes 5 minutes or 5 hours to hit your target, your profit stays the same.
Futures Trading Margin & Capital Requirements
Futures contracts are highly leveraged, meaning you can control large positions with relatively small capital. The actual notional value of 1 ES contract at 6000 ES = $300,000 (6000 × $50). However, brokers only require a fraction of that as margin. The margin requirements listed below are accurate as of February 7, 2025. However, they may change over time, so be sure to check with your broker for the most up-to-date requirements. This information is provided solely to explain the process.
Day Trading Margin
🔹 TD Ameritrade requires ~$16,200 margin per lot
🔹 NinjaTrader / Tradovate allow trading with as little as $500 per lot
Initial Margin (To hold a position as Swing Trade):
If you hold a futures trade and approach the market close and don’t have enough capital to meet the initial margin requirement, your broker will forcefully close your position, whether you are in profit or loss.
✅ For active traders, futures offer flexibility, but you must manage your margin properly.
Each broker has its own margin requirements, so traders should choose based on their capital and risk tolerance.
Futures vs. Options Quick Comparison
| Feature | Futures Trading | Options Trading |
|---|---|---|
| Greeks Involved | ❌ No Greeks | ✅ Delta, Theta, Vega, Gamma |
| Time Decay | ❌ No decay | ✅ Profits shrink over time |
| Profit Calculation | ✅ Fixed per point | ❌ Varies with IV and premium |
| Margin Required | ✅ Varies by broker | ✅ Varies by strike/expiration |
| Risk Management | ✅ Precise & Defined | ❌ Can be impacted by volatility |
| Execution Simplicity | ✅ Direction-based | ❌ More complex with spreads & IV |
Understanding Risk in Futures Trading
While futures trading offers clarity and efficiency, it also carries significant risk, making strict risk control essential. Unlike options, where the premium is the maximum risk, futures have no built-in loss limit—you must define it yourself.
📌 Always use a predefined stop-loss to prevent excessive losses. Automated stop levels ensure that if a trade goes against you, the system exits at a predetermined number of points, protecting your capital.
Without a stop, your trade can drain your entire account before your broker forcefully closes the position. For example:
- TD Ameritrade Margin Account Example:
- Start the day with $20K in your account
- Go long on ES, but the trade moves against you
- No stop-loss = loss continues until ~$16K, where the broker force-closes due to margin limits
- Result: $4,000 loss & no ability to trade until funds are replenished
- NinjaTrader Margin Example:
- Same $20K account but with only $500 per lot margin
- Trade moves against you with no stop-loss
- Broker only force-closes when the last $500 remains
- Result: $19,500 loss, nearly wiping out the account
🚨 Key Takeaway: Always use predefined stops—never let a trade run against you without a strict exit plan.
Futures Profits: No Percentages, Just Dollar Gains
Unlike stocks or options, where traders often talk about percentage gains, futures trading is purely point-based.
📌 Example:
- You go long ES and capture 10 points
- Since 1 ES point = $50, you make $500 per lot
It doesn’t matter if you started with $500, $5,000, or $50,000—your profit is simply $500. If your account was $500 on NinjaTrader, you technically doubled your money, but futures trading doesn’t work on percentages. It’s about absolute dollar gains or losses, not relative percentage returns.
At the end of the day, your net account value increases when you book profits and decreases when you book losses—simple as that.