Assume that the initial margin is equal to 5 percent of the total value and an investor
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Assume that the initial margin is equal to 5 percent of the total value and an investor holds one contract in an account. If the price of the contract changes by 5 percent because the price of the underlying commodity changes by 5 percent, this is equivalent to a 100 percent change in the investor’s equity. This example shows why futures trading can be risky!
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effectively demonstrates the leverage risk inherent in futures trading Heres a breakdown of what hap...View the full answer
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Related Book For 
Investments Analysis And Management
ISBN: 9781118975589
13th Edition
Authors: Charles P. Jones, Gerald R. Jensen
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