What Is an Event Contract in Futures Trading?

Event contracts are one of the simplest ways to express a market view. They offer a clear, low-cost way for traders to predict the outcome of daily market events. Rather than tracking price swings or using complex strategies, event contracts let traders ask a simple question, like “Will crude oil close above $70 today?” and potentially earn a fixed payout based on the answer.

In this article, we’ll break down exactly what an event contract is, how it works, and why it’s gaining traction with both new and experienced traders. You’ll also see how event contracts compare to traditional futures and learn whether they might be right for your trading goals.

Key Takeaways

• Event contracts are simple yes-or-no futures contracts that settle based on whether a market hits a specific condition by the end of the day.

• They are low-cost and beginner-friendly, typically costing between $5 and $20 per trade.

• Traders know their maximum risk and reward upfront.
• These contracts are available on major markets like the S&P 500, crude oil, gold, and other markets through regulated exchanges like CME Group.

What Is an Event Contract?

An event contract is a short-term, limited-risk derivative that allows traders to speculate on the outcome of a specific market event. Instead of tracking full price movement like traditional futures, event contracts ask a yes-or-no question:

Will [market] close above or below [price] today?

If the contract size is $20 and the event occurs, the contract settles at $20. If it doesn’t, it settles at $0. Your profit or loss is based on how much you paid for the contract. For example, if you buy a “Yes” contract for $8 and the event happens, you earn $12 profit. Depending on the contract, you can also exit the position for a profit (or loss) anytime before settlement. If you bought the contract at $8 and decide to sell when it hits $12 (but before settlement), you have made a profit of $4.

These contracts are listed on regulated exchanges such as the CME Group and are based on active futures markets like:

• E-mini S&P 500

• Crude Oil

• Gold

• Euro FX 

Event contracts are often compared to binary options, but with key differences. They are regulated, exchange-traded, and tied to real financial markets, making them a transparent, legal way to trade daily outcomes.

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How Do Event Contracts Work?

Trading an event contract involves four simple steps:

1. Choose a Market Event

Pick a contract that aligns with your market view. For example:

“Will the E-mini S&P 500 close above 6,500 today?”

2. Buy a “Yes” or “No” Position

• If you believe the event will happen, buy a “Yes” contract.

• If you believe it won’t, buy a “No” contract.

The price you pay reflects the market’s probability. If the “Yes” contract is trading at $12 and the contract size is $20, the market is pricing in about a 60% chance of that outcome.

3. Wait for Market Close

Event contracts settle based on that day’s official settlement price of the underlying futures market.

4. Get Paid Based on the Outcome

At the end of the trading day, your contract settles in one of two ways:

• If your prediction is correct, the contract settles at $20.

• If your prediction is wrong, the contract settles at $0.

Your profit or loss is the difference between what you paid and the settlement value:

• Profit = $20 – entry price (if correct)

• Loss = entry price (if wrong)

Example: If you buy a contract for $7 and you’re right, you receive $20 at settlement. Your profit is $13 ($20 – $7). If you’re wrong, the contract is worth $0 and you lose your $7.

Benefits of Trading Event Contracts

Event contracts are designed to be accessible, transparent, and easy to use. Here are the main reasons traders choose them:

Low Cost to Enter

Contracts typically cost between $5 and $20, depending on market conditions and which side you choose. This makes it easy for new traders to participate without needing large capital.

Defined Risk and Reward

There’s no guesswork. The maximum you can lose is what you paid for the contract. The maximum you can earn is the contract size minus your entry price.

Short-Term Outlook

These contracts settle daily. That means you don’t need to hold positions overnight or track long-term moves. Each trade lasts one trading session.

No Margin Requirements

You don’t need to post margin or worry about margin calls. This makes risk management easier, especially for new traders.

Beginner-Friendly Format

The yes/no format simplifies trading decisions. You don’t need advanced technical analysis or leverage-based strategies to participate.

Event Contract Examples

Let’s walk through some sample trades to see how they work in real life:

Example 1: S&P 500 Index Futures 

Contract Question: Will the E-mini S&P 500 close above 6,500 today?

• You buy a “Yes” contract for $9.

• If the S&P closes above 6,500, your contract settles at $20.

• You earn a profit of $11 ($20 – $9).

• If it closes at or below, you lose your $9.

Example 2: Crude Oil Futures 

Contract Question: Will crude oil close below $85 today?

• You buy a “Yes” contract for $7.50.

• If crude oil closes below $85, you get $20.

• Profit = $12.50.

• If it stays at or above $85, you lose $7.50.

Example 3: Gold Futures 

Contract Question: Will gold settle above $1,950 today?

• You buy a “No” contract for $11.25.

• If gold settles below $1,950, you earn $8.75 in profit.

• If it closes above, you lose $11.25.

Event Contracts vs Traditional Futures

Event contracts and traditional futures both allow traders to express market views, but they operate very differently. Here’s how they compare:

• Cost to enter is much lower with event contracts. You can trade with as little as $5 to $20, while traditional futures often require hundreds or thousands in margin.

• Event contracts have no leverage. Your gain or loss is capped, making them ideal for traders who want defined risk without the complexity of margin trading.

• Payouts in event contracts are fixed. You either receive $0 or the contract size, depending on the outcome, while traditional futures payouts vary based on how much the price moves.

• Event contracts settle daily. Each position expires at the close of the trading day, while traditional futures can be held overnight or for weeks until expiration.

• There is no risk of a margin call with event contracts. Since you’re never borrowing funds, you can’t lose more than you put in.

• Event contracts are simpler to understand. With a yes-or-no structure and fixed payout, they’re easier for beginners to trade compared to full-size futures contracts.

• Traditional futures offer higher potential reward, but with higher risk. Their unlimited gain/loss structure makes them more suitable for advanced traders with a risk management plan.

• Event contracts are ideal for short-term opinions. If you have a strong belief about where the market will close today, they let you act on it with minimal exposure.

Event contracts offer a more controlled way to express a directional opinion, while traditional futures offer larger potential gains, but with greater risk and complexity.

Who Are Event Contracts For?

Event contracts are designed to be accessible and low-risk, which makes them appealing to a wide range of traders. Whether you’re new to futures or just want a simpler way to express a market view, these contracts offer a straightforward solution.

• New traders: Event contracts are a simple way to get started in futures without needing deep market knowledge or large capital.

• Risk-conscious traders: With fixed outcomes and no margin calls, they offer clear limits on potential losses.

• Short-term market participants: If you enjoy reacting to daily news, economic releases, or intraday momentum, event contracts align with your trading style.

• Budget-conscious individuals: These contracts allow you to express a market view with as little as $5–$20 per trade.

• Experienced traders: Even seasoned market participants use event contracts to test directional ideas or add defined-risk positions to their strategy.

If you’re looking for a low-cost way to trade market outcomes with confidence and simplicity, event contracts could be a smart addition to your trading toolkit.

Risks and Limitations of Event Contracts

Event contracts are designed to be simple and low-cost, but like any trading product, they have trade-offs that traders need to understand. Knowing the risks upfront helps you use them more effectively and avoid common mistakes.

• You can lose your entire entry cost: If your prediction is wrong, you lose 100% of the amount you paid for the contract.

• Upside is capped at $20 per contract: The maximum payout is fixed, so profits are limited compared to traditional futures, where gains can keep growing.

• Prices reflect market consensus: Contract prices already factor in the probability of an outcome, which means favorable risk-reward opportunities may be harder to find.

• Not designed for long-term trading: Since contracts settle daily, they are best for short-term market views and don’t work well for holding longer-term positions.

While these limitations may discourage some traders, they are part of what makes event contracts simple and predictable. By focusing on short-term outcomes with defined risk, traders can use them as a tool for practicing market instincts or managing exposure without the pressure of margin and leverage.

Prediction Markets vs Event Contracts

Event contracts generally refer to regulated, yes‑or‑no outcomes tied to financial markets (e.g. commodities, equities, FX) or specific measurable events. Prediction markets tend to cover more abstract or non‑market events (politics, pop culture, weather, etc.) and often have a less clear regulatory framework.

• Kalshi is an exchange registered with the U.S. CFTC. It offers event contracts both in financial markets and non‑financial areas (like political outcomes and weather), under regulation.

• Polymarket has historically operated via crypto and prediction market mechanics, focusing on non‑market events, and was formerly required to block U.S. users due to regulatory enforcement. Its acquisition of QCEX (a CFTC‑licensed exchange) in 2025 is giving it a legal path to operate in the U.S. under stricter compliance.

• The legal status of some prediction market‑style event offerings depends on whether they fall under what the CFTC considers “gaming” and whether they satisfy public interest tests. Contracts that are seen as betting on wrongful, unlawful, or offensive events can be prohibited or challenged.

• Regulated event contracts provide more clarity for traders, such as enforceable contract terms, clearing, oversight, and known compliance; whereas prediction markets may carry extra risk from legal, counterparty, or exposure sides.

Final Thoughts: Should You Trade Event Contracts?

If you’re looking for a low-cost, low-risk way to get started in futures trading, event contracts offer a great entry point. They allow traders to focus on one question at a time and provide immediate feedback with clear profit and loss boundaries.

While they’re not suited for every strategy or long-term investing, event contracts give retail traders a simplified way to participate in market events. Whether you’re testing your daily market instincts or adding structure to your trading plan, these contracts can be a helpful tool in your trading toolbox.

And best of all, you can trade them on regulated platforms with confidence and transparency.

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Event contracts highlight how defined risk and clear outcomes make trading more approachable. MetroTrade’s mission is to bring that same accessibility to futures markets. Open an account today and explore the markets with confidence.

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Frequently Asked Questions

The content provided is for informational and educational purposes only and should not be considered trading, investment, tax, or legal advice. Futures trading involves substantial risk and is not suitable for every investor. Past performance is not indicative of future results. You should carefully consider whether trading is appropriate for your financial situation. Always consult with a licensed financial professional before making any trading decisions. MetroTrade is not liable for any losses or damages arising from the use of this content.