Commodity market futures News
INVESTOPEDIA EXPLAINSTrading in commodity futures contracts can be very risky for the inexperienced. One cause of this risk is the high amount of leverage generally involved in holding futures contracts. For example, for an initial margin of $5, 000, an investor can enter into a futures contract for 1, 000 barrels of oil valued at $50, 000. Given this large amount of leverage, even a very small move in the price of a commodity could result in large gains or losses compared to the initial margin. Unlike options, futures are the obligation of the purchase or sale of the underlying asset. Simply not closing an existing position could result in an inexperienced investor taking delivery of a large quantity of an unwanted commodity.
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