Margin is the money paid in advance as a credit guarantee during the trading process, which is kept by the exchange as a financial guarantee for its performance of futures contracts. Therefore, you need to deposit a deposit before trading.
Futures contracts are similar to forward contracts, and the deposit can be understood as the deposit of the contract. However, the deposit is generally collected by the seller from the buyer to pay the buyer's breach of contract losses. Sellers generally need to have a high delivery ability, otherwise buyers will not pay the deposit.
Futures margin is collected by the exchange from both parties. Before the expiration of the contract, as long as the deposit is paid in full, both parties can sell short and do not need to be qualified for physical delivery.
In the modern financial system, margin trading is widespread, as well as margin foreign exchange, gold deferred trading and swap trading. Because speculators can enlarge the transaction amount through margin trading, it is also called leveraged trading.
The core of modern financial system is credit. Although futures trading is not a complete credit transaction, it has the characteristics of credit transaction through hierarchical settlement and margin mechanism, which enlarges the transaction amount and reduces the transaction cost, thus promoting the overall activity of the market.
Margin trading will inevitably bring the potential risk that the losses cannot be fully paid. When the price fluctuates extremely, the losing party can't close the position due to insufficient liquidity, and the loss may exceed the deposit. For the risks of individual customers, members are responsible for paying the losses first and recovering them later.
Tips: Please stay away from illegal fund-raising, illegal fund allocation, financial management on behalf of customers, false or misleading publicity/inducing transactions, illegal consultation/pending orders, providing trading software and other illegal acts.
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