Futures contracts — what they are and how they work in Poland

What is a futures contract?

A futures contract is an agreement between two parties to buy or sell a specific asset in the future at a predetermined price. It's standardized and traded on an exchange.

Unlike options — futures obligate both parties to execute the transaction.

Quick Answer

A futures contract is a standardized, exchange-traded agreement obligating two parties to buy or sell an asset in the future at a price fixed today; unlike options, it obligates both parties to execute. Instead of paying the full value, you post a margin deposit of usually 5–15%, which creates financial leverage — a 50,000 PLN WIG20 contract needs only ~5,000 PLN (leverage 1:10). Underlying instruments include indices, currencies, commodities and bonds, and most contracts are cash-settled before expiration. Because leverage means losses can exceed the deposited margin, futures carry substantial risk. This is educational information, not investment advice.

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How do futures work?

Mechanism

1. Buyer (long) commits to buying the asset at a specified time
2. Seller (short) commits to selling
3. Price is set at the time of contract conclusion
4. In practice, most contracts are closed before expiration (cash settlement)

Margin deposit

You don't need to pay the full contract value. A deposit is sufficient — usually 5–15% of value. This creates financial leverage.

Example: WIG20 contract worth 50,000 PLN requires deposit of ~5,000 PLN. Leverage 1:10.

What are futures contracts for?

Popular underlying instruments

• Stock indices — WIG20, S&P 500, DAX
• Currencies — EUR/USD, USD/PLN
• Commodities — oil, gold, wheat
• Bonds — e.g., US Treasury futures
• Cryptocurrencies — BTC, ETH (on CME)

Who uses futures?

• Hedgers — companies hedging against price changes (e.g., airlines hedge fuel prices)
• Speculators — profit from price changes, accepting risk
• Arbitrageurs — exploit price differences between markets

Risk

• Leverage — losses can exceed the deposited margin
• Margin call — if deposit falls below minimum, broker requires additional payment
• Liquidity — some contracts have low liquidity
• Rolling — need to close expiring contract and open new one (contango costs)

Futures vs options

Futures on GPW (Warsaw Stock Exchange)

The Warsaw Stock Exchange offers contracts on:

• WIG20 index
• Selected stocks (KGHM, PKO BP, PKN Orlen)
• Currencies (USD/PLN, EUR/PLN)

How Freenance can help

Freenance allows you to include futures contract positions in your complete portfolio picture, tracking exposure and leverage impact on your finances.

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FAQ

What makes a futures contract "standardized"?

Standardization means that contract size, quality of the underlying asset, delivery dates and settlement rules are defined by the exchange, not negotiated bilaterally. Only the price is determined in the market, which makes contracts easily comparable and transferable between participants.

On which exchanges are futures contracts traded?

Futures are traded on regulated derivatives exchanges, such as CME in the United States, Eurex in Europe or the Warsaw Stock Exchange (GPW) in Poland. Each exchange publishes contract specifications, trading hours and clearing rules through its central counterparty (CCP).

What is the expiry date of a futures contract?

The expiry date is the moment when the contract reaches maturity and is settled — either by physical delivery of the underlying asset or, more commonly, by cash settlement against the reference price. Most active traders close their positions before expiry to avoid delivery procedures.

What is the difference between futures and forwards?

Forwards are non-standardized agreements traded over-the-counter (OTC) directly between two parties, with no central clearing. Futures are standardized, exchange-traded and cleared through a CCP, which significantly reduces counterparty risk but requires daily mark-to-market and margin.

Are futures contracts suitable for long-term investors?

Futures are mostly designed for hedging and short-term speculation, not for buy-and-hold strategies. Leverage, the need to roll positions and daily settlement make them demanding instruments, and they may not be appropriate for every investor's risk profile.