KIC000066 - Margins Since you can take big losses In...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Margins Since you can take big losses In futures you need a margin to trade in these. Initial margin = set at the initiation of the contract. At each‘day the contract is marked to market to and the margin account may dip below the maintenance margin. Once below the maintenance margin. the investor must deposit a variation margin to get the initial margin. Leverage and Returns Since you only put up a margin, you can create leveraged returns with futures. Say the contract is for $100 worth of hands. If the margin ls x96 ofthe contract value (for example 10%). Then you an lever an investment 1/xtlmes. If the margin is 10% the you an invest $1000 with 10 times the leverage you would with another investment. This is helpful for speculation and for dreap hedging. Otherwise hedging would be very expensive to do. Interest Rate Futures T~Bi|l Futures T—Note Futures T-Bond Futures Eurodollar Futures (LIBOR) Fed Funds Futures Muni bond index Futures Swap Futures Possible to bet on or hedge pretty much any interest rate. ...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern