Spot-Quoted Futures (SQFs): A More Accessible Way to Trade Futures
The world of futures contracts can feel complex and costly, often creating a high barrier to entry. However, a new product called Spot-Quoted Futures (SQFs) is designed to make futures trading more accessible and intuitive especially for traders who are new to the futures market.
SQFs combine the structure of a futures contract with direct pricing based on the current spot price of the underlying asset. This article explains what SQFs are, how they work, and why they represent a simpler path into futures trading.
Important Risk Warning
Futures trading, including SQFs, involves leverage and carries a high risk of losing money rapidly. Past performance is not an indication of future results. Only trade with money you can afford to lose.
What Are Spot-Quoted Futures?
Spot-Quoted Futures are a modern type of futures contract offered by the CME Group, the world’s largest futures exchange. Unlike traditional futures, SQFs are priced to closely track the current spot price of the underlying asset (such as a stock index, currency, commodity, or cryptocurrency).
This design removes much of the complexity found in traditional futures markets, where financing costs, dividends, and other carry elements are built into the contract price (often resulting in contango or backwardation). With SQFs, these costs are reported separately, making the price behaviour more straightforward and easier to follow.
How Do Spot-Quoted Futures Work?
SQFs are cash-settled daily. At the end of each trading day, any profit or loss is realised and added to or subtracted from your account balance. Your position is then reset at the new settlement price for the following day.
This daily settlement process makes it easier to track performance and manage risk. While SQFs are derivative contracts (you do not own the underlying asset), their spot-price tracking makes them feel more similar to trading stocks or ETFs in terms of price behaviour.
How Are SQFs Priced?
SQF prices are quoted based directly on the spot value of the underlying asset. This creates a more intuitive and transparent pricing model compared to traditional futures, where the contract price includes various cost-of-carry factors.
What Is ADJ?
The Adjustment Mechanism (ADJ) is a daily fee (or credit) applied to accounts holding SQF positions overnight. It accounts for real-world factors such as interest rates, funding costs, and dividends (for equity indices).
On the Robinhood platform, the ADJ is shown as a single, clear daily adjustment in your account. This transparency helps you separate market performance from financing costs when analysing your overall P&L.
Examples of SQF Positions
Day Trade Example
You buy one contract of the Spot-Quoted S&P 500 future at 6,200. The price rises to 6,350 during the day. Your profit is calculated as (6,350 – 6,200) × contract multiplier (minus any fees).
Two-Day Trade Example
- You buy one contract at 6,250. The market closes at 6,350 → you realise a $100 daily gain.
- The next day the price moves to 6,360 and you close the position → you realise an additional $10 gain.
Total profit: $110 (before fees and ADJ).
(The reverse scenario would apply for losses.)
These are hypothetical examples for illustration only. Actual results will vary and include commissions and the daily ADJ.
What SQFs Are Available to Trade?
SQFs can track a wide range of underlying assets. Popular examples include:
- Major stock indices (e.g., Spot-Quoted S&P 500)
- Cryptocurrencies (e.g., Spot-Quoted Bitcoin and Ethereum)
Always check the latest available instruments and contract specifications on the platform before trading.
SQFs vs Traditional Futures vs CFDs
*CFDs are not available for residents of Spain and Belgium.
All three products involve leverage and carry a high risk of loss. Leveraged trading is not suitable for all investors.
Advantages and Risks of Spot-Quoted Futures
Final Thoughts
Spot-Quoted Futures represent a significant step forward in making futures trading more accessible. Their spot-price tracking, smaller contract sizes, and transparent cost structure help lower the traditional barriers that many new traders face.
However, SQFs remain leveraged products with substantial risk. They should only be used after you fully understand how they work and have a clear risk-management plan in place.
At Robinhood Academy, our goal is to make advanced instruments like SQFs clear and approachable so you can explore them confidently as part of a balanced trading strategy.
