What are the mechanics of a Futures Trade?
A. As a buyer or seller of futures contracts, you must make an initial “good faith” deposit (margin). Since contracts may be closed (liquidated) at any time prior to the “settlement” date, every futures position in your account is marked-to-the-market (its value calculated at the close of each (trading day) and profits/losses are credited to/debited against your account. Any profits over the margin requirement may be withdrawn or used for other futures contracts. Futures traders exercise substantial leverage by utilizing a performance bond or MARGIN to control a futures contract. Margin is money deposited by both the buyer and the seller to assure the integrity of the contract. The minimum margins are set by the Exchange and are usually about 10% of the total value of the contract. Details concerning the customer’s margin requirements can be obtained from a broker. In this way investors realize full price movements without investing the full amount of capital which each contract repres
