Futures, Spot and CFDs: How Commodity Contracts Work
When you look up the 'price of oil' or the 'price of gold', you could be looking at several different numbers. Knowing which one you are seeing avoids a lot of confusion.
Futures contracts
A futures contract fixes the quantity, quality, delivery location and delivery month of a commodity. For example, one NYMEX WTI crude contract represents 1,000 barrels. Prices are quoted per unit (per barrel, per ounce, per bushel), and each contract has a minimum price step called a tick.
Several delivery months trade at once. The nearest active one is usually called the front month, and it is the price most headlines quote.
Margin and leverage
Futures are traded on margin: you deposit only a fraction of the contract's value. That leverage magnifies both gains and losses. A move of a few percent in the underlying price can equal a large share of your margin.
Rollover, contango and backwardation
Because contracts expire, traders who want to stay in a position must roll from the expiring month into a later one. The shape of the futures curve matters here:
- Contango: later months are priced higher than nearer months, often when supply is plentiful and storage costs are high.
- Backwardation: nearer months are priced higher, which usually signals tight current supply.
Spot and OTC prices
Precious metals also trade 'spot' over the counter, for example XAU/USD for gold, almost 24 hours a day. Spot and front-month futures track each other closely, with differences reflecting interest rates and storage costs.
CFDs and reference prices
Many charting platforms and brokers show contract-for-difference (CFD) prices that are derived from the underlying futures or spot market. The charts on this site use freely embeddable reference symbols, so values can differ slightly from a specific exchange contract. Always check your broker's or exchange's own data before making decisions.
Educational content only, not financial advice. See our disclaimer.
Next guide: How to Read Candlestick Charts