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Why Trade Futures?

Savvy investors know that every day brings potential investment opportunities. It has only became increasingly true as today’s technology makes the world seem smaller and the news come faster then ever. Providing fast, easy, and cost effective way of accessing financial and commodity markets around the clock, futures offer you the most direct and transparent method to act on your insight and participate in market trends. Futures also allow you to hedge adverse price volatility to risk manage your business operation or investment portfolio.

Transparency

Regulated futures exchanges provide a centralized marketplace where trading is open, fair, and anonymous. Comprehensive price and transaction data is distributed in real time providing clear and transparent view of the market to all participants.

Volatility

Futures are known for experiencing considerable price movement. While volatility can work for you or against you, many speculative investors want markets that move. Where there is volatility there is opportunity.

Pure Price Play

Whether you have a perspective about commodity prices, energy prices, interest rates or stock market direction, futures allow you to invest directly in the markets and events you have an opinion about.

With futures, it’s just as easy to sell as it is to buy. Unlike many other investments instruments, there are no special forms to fill, no “uptick rules” and ho higher financial requirements to meet. The requirements for taking a short position are exactly the same as for a long position.

There are no secrets. Futures market data often come from government agencies, exchanges and other public domain sources.

The Power of Leverage

Futures is one of the most capital-efficient investment vehicles available. High degree of leverage is created through the use of margin (minimum deposit required to buy or sell a futures contract), which may represent only a fraction of the total value of the contract (often 3-12%). With futures you can make a larger investment using a much smaller amount.

In term of investments returns, leverage is a double-edge sword. While leverage provides for greater returns for investors on the winning side of the market, it equally enhances losses if market moves against the you. And, with futures it’s possible to loose more then your initial investment.

Leverage provides you with more flexibility and capital efficiency in regard to funds allocation. At the same it also requires a well thought out management plan that addresses the amount of leverage used.

Portfolio Diversification

Participating in futures trading allows you to diversify your portfolio. Many professionals seeks to hedge risk exposure of stock and bonds portfolios by using stock indexes and interest rate futures contracts. They may also diversify their assets to commodity and currency futures because of their low correlation to investments in stocks and bonds.

Risk Management

Futures offer unique risk management capabilities for companies and investors with risk exposure to adverse fluctuations in values of commodities, stock indices, foreign currencies and interest rates. Hedging risk with the use of exchange traded futures contracts and options provide an effective mechanism for managing market risk.

Around-the-Clock Trading

Most popular futures markets trade around the clock and around the globe. It’s easy to get in and get out of position in popular and liquid futures markets, and you can do this with a click of a button, virtually 24 hours a day. Thus, if overnight events dictate action, you can participate.

Financial Safeguards

Clearing organizations of regulated futures exchanges provide an important part of the futures trading value proposition. By serving as a counterpart to every transaction exchange clearing becomes a seller to every buyer and a buyer to every seller, virtually eliminating credit risk for each market participants. Exchange clearing is also responsible for daily settlement of trading accounts, which helps to limit the accumulation of loses. The presence of the central counterparty is an important advantage of future trading compared to over-the-counter markets.

Segregated Accounts

Funds used to trade futures on US regulated exchanges are held in a segregated account. That means that your money is held independently and it’s not pooled with other customers money or with the firm’s money. Consequently, if your broker is to experience any kind of financial difficulties, it will not effect your personal account.

Potential Tax Benefits

US citizens trading futures receive specific tax advantages compared to individuals trading stocks. Futures profits (with the exception of securities futures) are taxed at the “60/40” rate – 60% taxed at the favorable long-term rate and 40% taxed at the short-term rate. Consult with your tax specialist to address you individual circumstances.


Trading futures contracts or options on futures contracts involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the Risk Disclosure available on our website.

 

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