Why does the general public say that futures trading is very risky?
A. Many people feel that futures trading is risky primarily because of the amount of leverage available to futures traders. For example, it only takes $4,000 in initial margins to trade a contract worth approximately $50,000 of the mini S&P 500, so the leverage available is 12:1. Because many investors who trade for themselves or use the services of a broker do not know how to take advantage of the leverage available or manage their risk exposure, they tend to lose money. That is why it makes sense to delegate responsibility for trading futures and forex to a registered CTA who follows the markets on a full-time basis and knows how to use leverage appropriately as part of an overall strategy for trading these markets. Furthermore, because managed futures are a separate asset class and are not correlated to traditional markets, portfolios including managed futures may be more diversified than those without managed futures. Comparisons of the futures indices to the S&P 500 and Nasdaq sho
