Is futures leverage?
Yes, futures trading is a kind of leveraged trading. In futures trading, traders only need to pay a small part of the total contract value as a deposit, so they can control the contract with greater value. This means that traders can amplify their investment effects by using leverage. Take the futures contract as an example. Suppose the standard value of a futures contract is $65,438+000,000. The exchange requires traders to pay a certain percentage of the contract value as a deposit, such as 5% or 10%. The margin ratio is 65,438+00%, so investors can control the futures contract with a value of 65,438+000,000 only by paying the margin of 65,438+000,000. Through leveraged trading, investors can get higher return on investment with relatively small capital investment. So futures are leveraged transactions. However, leveraged trading also brings risks, because investors may face greater losses. Price fluctuation will lead to insufficient margin to maintain the position, which will lead to forced liquidation.