When Markets Move Fast: What Are Futures?
In late January 2026, silver made headlines for all the wrong reasons. After months of gains, the metal hit a high of $121 per ounce on January 29, before falling more than 30% to just under $75 per ounce the following day.[1] At the center of the story was JPMorgan Chase and a set of financial instruments called futures contracts. To understand what happened and why it matters, we should start at the beginning.
A quick definition for context: A futures contract is a legal agreement to buy or sell something at a specific price on a specific date in the future. The basic idea is that you are locking in a price today for a transaction that happens later, which turns out to be a useful thing in a lot of industries.
Futures contracts were not invented for speculation. They exist because uncertainty is expensive.
Think about an airline selling tickets for flights nine months out. They have no idea what fuel will cost by then. To price those tickets accurately today, they might buy fuel futures, locking in a price now for fuel they will need later. If fuel gets cheaper, they overpaid a little. If it gets more expensive, they protected themselves. Either way, they were able to plan ahead.
Farmers work similarly. A farmer planting corn in March has no guarantee what it will sell for at harvest in October. By selling a futures contract in the spring, he can lock in a price before the crop is even in the ground. Some of the uncertainty, at least, is gone.
Not everyone engaging with futures contracts is a farmer or an airline. These markets tend to attract a wide range of participants, each coming in with different motivations and different goals.
While some are there for practical reasons, others are purely speculative, buying and selling contracts with no intention of ever touching the underlying commodity. They are simply riding price movements, hoping to sell a contract for more than they paid for it.
Here is the thing though: those different personalities tend to need each other. The farmer needs someone willing to take the other side of his contract. The speculator, self-interested as they may be, can provide that. Think of it like an ecosystem where every participant, whatever their motivation, plays some role in keeping things running.
But like any ecosystem, things can go wrong when one part of it grows out of proportion.
Which is part of what happened with silver. Every futures contract has two sides. The buyer holds what is called a long position and tends to profit when prices rise. The seller holds a short position and tends to profit when prices fall. These terms apply across financial markets broadly, not just futures.
JPMorgan held the short position on silver. As it climbed from around $29 an ounce in early 2025 all the way to $121 an ounce by late January 2026,[2] that position was accumulating what could have been substantial losses on paper. How that story ends will be its own separate entry.
Next time we will get into leverage, margin calls, and what JPMorgan’s handling of their silver position looked like up close.