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BENEFITS OF DAY TRADING FUTURES

As an equity trader, have you ever been locked out of trading due to a day trading violation? Or have you missed an opportunity due to short selling restrictions?

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Missed opportunities can be costly, so we will look at some of the restrictions for day trading cash equity products and compare that to day trading with futures.

The Power of Leverage

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Leverage can seem risky, but when used properly it is a game-changer. Leverage is the ability to control a large contract value with a relatively small amount of capital. In the futures market, that capital is called performance bond, or initial margin, and is typically 3-12% of a contract's notional or cash value.

 

Assume that one E-mini S&P 500 future has a value of $103,800. You initiate a position by posting an initial margin of at least $5,060. In other words, you will have exposure to $103,800, but you have only put down a small percentage of the value. This is called greater capital efficiency.

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Introducing Futures
01:15

Introducing Futures

BENEFITS OF DAY TRADING FUTURES As an equity trader, have you ever been locked out of trading due to a day trading violation? Or have you missed an opportunity due to short selling restrictions?​ Missed opportunities can be costly, so we will look at some of the restrictions for day trading cash equity products and compare that to day trading with futures.
24 Hours Access
01:48

24 Hours Access

The Benefits of Open Access to Futures. If you are only an equity trader, when a market is closed and an opportunity arises, you cannot take advantage of it. And worse, if you need to exit a position, you have to wait until the market opens. It comes down to one question: where would you rather be to take advantage of market opportunities or to manage risk, on the sidelines waiting for the markets to open or already trading futures? With nearly 24-hour access, futures markets give you the ability to express your opinion and manage risk around the clock.
Ease to short
02:36

Ease to short

No Short Sale Restrictions. Another common struggle for equity day traders is that in order to short a security, there must be shares available to trade. And there are many reasons why shares may not be available. In comparison, a futures trader does not have the same short sale restrictions. You can take a short position as easily as a long position.
Liqudity
01:24

Liqudity

The Benefits of Liquidity Liquidity is perhaps one of the most important elements in gauging opportunities in a market. Understanding liquidity in a market is a critical consideration for traders before jumping into a trade. Futures markets offer deep liquid markets that let traders express their opinions in a tremendously efficient way.
Cost efficient
01:55

Cost efficient

Tight Bid-Offer in Futures versus ETFs An ETF is a security that tracks an index, a commodity, or a basket of assets like an index fund but trades like a stock on an exchange. A futures contract, on the other hand, is a contractual agreement to buy or sell a particular commodity or financial instrument at a predetermined price in the future. One thing traders look for is the ability to get in and out of a market efficiently. A tight bid-offer spread makes that possible.
Diversification
01:48

Diversification

The Benefits of Portfolio Diversification. One of the most important characteristics of any investment portfolio is its diversity. Typically, traders diversify by trading both equities and bonds. But in times of market volatility, a portfolio can benefit by the addition of futures and options on futures contracts. Futures and options on futures give market participants the opportunity to hedge against market risk by sector and to raise and lower levels of desired exposure in times of anticipated and unanticipated event-driven volatility.

Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. This is neither a solicitation nor an offer to buy or sell futures, options or forex. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed here. Past performance is not necessarily indicative of future results.

Algorithmic trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Testimonials appearing may not be representative of other clients or customers and is not a guarantee of future performance or success.

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