Some of the features that make futures and options appealing investments include leverage, diversification, opportunity, liquidity and price availability.commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Leverage
Futures and options have a unique feature that make them a more attractive instrument from a trading perspective than stocks, bonds, real estate and even hockey cards, and that is high leverage. Leverage is a measure of the worth or value of an investment relative to the money required to buy (or sell) the investment. For example, if you need to pay the full value of an asset when you buy it, then there is no leverage. On the other hand, if you only need to put up a small fraction of the value of an asset in order to buy it, then leverage is high. Futures are highly leveraged assets since you only need to put a little money down, referred to as margin, to control a lot of futures value. Margin requirements for various futures contracts can be found on the World Link Futures web site. Typically, a futures contract can be bought or sold with a margin of 2% to 20% of the value of the contract - and that gives you a lot of leverage. For instance, initial margin on one Deutschemark currency futures contract valued at $78,000 may only be $2,500, or 3.2% of the value of the futures contract. Remember that, with futures, the money or margin required to buy or sell a contract is not a cost but just a "goodwill" performance bond - you get this money back when you close your futures position, plus any gain or minus any loss on the futures position itself. The high degree of leverage allows you to trade a lot of value for little cash and this, in turn, enables you to earn a great deal of money or lose a great deal of money often in a short space of time.

For example, an investor buys one Deutschemark currency futures at $0.6245 and deposits the required margin of $2,500. Three days later, Deutschemark futures have rallied and the investor sells his futures contract at $0.6365. The profit on the futures position is $1,500 which represents a return of 60% on the margin deposit. Even though the Deutchemark futures itself only rose by 2%, the percentage gain on the trade is substantially higher because of leverage.

Leverage is a two-edged sword. A great amount of money can be made in a short period of time, and a great amount of money can be lost in a short period of time. Consequently, leverage makes investing in futures risky. You can lower this risk, however, by managing your leverage properly with respect to your net worth, trading experience, and personal attitude towards risk. The successful trader is one who understands this and has the discipline to control leverage.

Diversification
Futures contracts are also appealing because they can provide diversification to a portfolio of traditional financial assets such as stocks and bonds. Many investors are already aware of the benefits of diversification within their equity portfolios - the more company stocks you hold, the less volatile is the value of your overall portfolio since as some stocks go down, others go up. On average, the portfolio earns a return very similar to the entire market. In the same way, an investment in futures can provide diversification benefits in terms of reducing the overall risk of your investment portfolio and increasing total profits.commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Opportunity
Futures and options are available on a wide range of instruments including agricultural commodities like wheat and soybeans, precious metals like gold and silver, foreign currencies like the Deutschemark and Canadian dollar, interest rates like U.S. long-term bonds and Treasury bills, soft commodities like coffee and sugar, index products on equities and currencies, and energy products like crude oil and natural gas, to name a few. With all of these markets, you are bound to discover a trading opportunity or two at almost any time.commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Liquidity
Investors require market liquidity. A market is said to be liquid if transactions can be executed quickly and easily. There are many futures markets that are liquid, sometimes even more liquid than the cash market for the underlying instruments themselves. For instance, the futures market in U.S. Treasury bonds is regarded as being much more liquid than the cash market. In some cases, the futures market is so liquid that futures prices become the industry benchmark. For example, gold, crude oil and cotton futures prices form the basis for pricing other related products in the industry. On the other hand, some futures markets are thin, meaning not very liquid. As a trader, you must know the liquidity of the market that you are trading or want to trade, and adjust your trading style appropriately. Volume and open interest provide a good indication of market liquidity, the higher are they, the more liquid is the market. commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.
Price Availability
Futures and options prices are readily available from a wide range of sources including the Internet. This makes it very easy for traders to monitor the markets, determine their entry and exit points, and manage their futures positions - all of which provide more reasons to trade futures.commodity futures broker, futures trader, commodities futures trading, financial and commodity futures markets, paper trading, full service broker assisted accounts.