At-a-Glance
Today’s Top Highlights
The equity markets are feeling some pressure today after the Nasdaq traded to a record high price yesterday. 10-Year yield futures moved significantly higher today trading up over 2.4% out above the highs from October of 2023, which out pressure on the equities. The Nasdaq was trading at “overbought” levels and reached a record high, so it is not uncommon to see prices cool off as traders exit long positions and digest this move higher. Also, the market has strong momentum after breaking out above a strong congestion from an ascending triangle chart pattern on a weekly chart. When markets are trading near record highs in the equities, it is key to understand that the equity index futures markets offer several different sizes for traders to utilize, including the mini, micro, and nano sized contracts. The smaller sizes allow traders to participate in the market they choose based on their own risk tolerance and account balance and can be very beneficial for retail traders.
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“How does margin trading work in futures?”
Unlike stock trading where you pay full price, futures require only a small upfront deposit called "initial margin" (typically 3% to 12% of the contract's total value) to open a position. While this leverage amplifies potential gains, it equally magnifies losses, requiring traders to maintain a minimum "maintenance margin" to avoid liquidation or a margin call.
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Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Due to the leveraged nature of futures trading and swaps trading, it is possible to lose more than the amount deposited in a position. Therefore, traders should not deposit more funds than they can afford to lose without negatively affecting their lifestyles. A trader cannot expect to profit on each trade, and should only devote a small amount of their available funds to each trade. All references to options refer to options on futures.
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