New answers tagged

1

I know how margin trading works, but I want to understand why it is so common in the futures markets. Because with futures, unlike stocks, you do not exchange cash upfront, therefore leverage (without any margin account) is infinite. Say you "buy" an oil futures contract at $50. You do not pay $50 for this and then sell it for the current price of oil - ...


2

Leverage is not necessary with a futures contract. The entire cash value of the underlying commodity can be held in the account. Well, the account will note the amount of margin used from the free balance but the investor can certainly be proven to be unleveraged by the cash balance. In fact ticker USO is a fund that accounts positions in oil using futures ...


Top 50 recent answers are included