Futures, Future Contracts, Analysis and Speculating
Futures contracts are complex investments that should not appear in investor’s majority of portfolios because of the loss risks in relation to other securities such as stocks and bonds. The greatest risk is caused by the leverage obtained from futures contracts.
Futures contracts investors are required to pay only a small percentage (2 to 10%) of the total value of the contract. If the value of the contract declines significantly, investors are forced to pay additional amounts. Omitting to deliver such additional funds would result in a loss and liquidation of the investor’s position.
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