Spot, CFDs and futures are different contracts

Prerequisite: Leverage is exposure, margin is collateral

On a small screen, scroll the figure sideways or open it full size.

Learning objective

Identify ownership, counterparty, financing and expiry before comparing products.

Spot describes a transaction with near-term settlement under the market’s convention; it does not by itself establish whether a retail account delivers the underlying currency or asset. Read the agreement. Some products marketed alongside spot prices are rolling derivatives rather than ownership transferred to you.

A CFD is generally an agreement to exchange a price difference with the provider, with contract-specific financing and margin. Exchange futures have standardised specifications and expiry, with clearing and margin processes. Clearing changes counterparty arrangements but does not eliminate market risk or all operational risks.

Futures prices can differ from spot because of financing, storage, distributions or other carry components. Holding beyond expiry may involve cash settlement or delivery according to the contract. Rolling to another expiry adds transaction costs and changes exposure; a continuous chart is not one directly tradable contract.

Common mistakes

Do not equate margin with maximum loss or compare spreads without adding financing, commissions and rollover costs.

Practice

Create a product comparison using actual official specifications: ownership, legal counterparty, multiplier, financing, expiry and settlement. Keep example prices hypothetical.

Sources & further reading

• CME Group — Fundamentals and FX Futures
• CFTC — Eight Things You Should Know Before Trading Forex