# A futures decision checklist

**FUT-27 · Equity Index Futures · Core**

**Lesson question:** How do you move from observations to conditional risk?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** FUT-01

A checklist should establish the contract, context, liquidity, event exposure and cash consequences. It is a reasoning tool, not a score that obliges an entry. Waiting can be a complete decision.

Separate observed facts, model estimates and unanswered questions.

## Understand the mechanism

The active month and multiplier come before a target. Session behavior, price location and available execution come before a directional claim. If dealer analytics are used, their uncertainty remains part of the note.

Risk/reward geometry describes planned distances, not win probability or guaranteed fills.

## Walk through the process

Write entry conditions, invalidation and a reasonable objective. Recompute when the available price changes. Review process separately from outcome afterward.

A lucky result does not validate a skipped liquidity check, and a losing result does not automatically invalidate a sound conditional process.

## Operational boundary

All figures are fictional teaching inputs, not current quotes or margin schedules. Product rules, broker requirements and usable liquidity remain separate from the model example. A planned exit and an algebraic hedge are not execution guarantees.

## A worked example

A hypothetical long at 5,020 has invalidation 5,014 and objective 5,032. At 50 dollars per point the intended distances are 300 adverse and 600 favorable before costs.

If entry worsens to 5,028, reward becomes 200 and intended risk 700. The original two-to-one ratio no longer exists. The graph illustrates the initial planned dollars only.

## Graph: A futures decision checklist—worked comparison

**Horizontal:** Intended risk / reward  
**Vertical:** Planned distance value (USD)

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/equity-futures/FUT-27.js` and displayed as an accessible table in the HTML lesson.

## What would invalidate the reading?

Chasing price while retaining the original ratio hides a deteriorated setup. A stop still lacks a guaranteed fill.

## Check your understanding

### What is intended risk from 5,020 to 5,014 at 50 dollars per point?

**Answer:** 300 before costs.

**Why:** Six points×50; intended, not guaranteed.

### What is the critical failure to avoid?

**Answer:** Chasing price while retaining the original ratio hides a deteriorated setup. A stop still lacks a guaranteed fill.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: How do you move from observations to conditional risk? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [CME Introduction to Futures](https://www.cmegroup.com/education/courses/introduction-to-futures)

- [CME Micro E-mini overview](https://www.cmegroup.com/education/courses/micro-e-mini-futures/micro-e-mini-futures-products-overview)