Too complicated for my feeble mind.
I suppose they are generally related to a stock, and I don't like stocks.
I did it a couple of times, some worked out, the others didn't.
All I want is to trade is something that moves every day, in at least a somewhat predictable manner, and has the volume to execute my order when it hits. Indexes tend to do that, and not be too
too volatile.
https://www.investopedia.com/terms/i/initialmargin.asp#:~:text=For futures contracts, exchanges set,5% of the contract value.
The margin is your guarantee that you can pay if you lose on the trade. Actually, I think money is moved around between the winners and losers every day at 4:15pm (for YM), so nobody gets screwed by another's non-payment.
Leverage:
Imagine a stock selling for $34,679 - current Dow Futures price. The $5 contract (mini) pays or takes $5 per dollar change of the Index. To get the same rate of change, were it a stock, you would need to own five shares, valued at $173,395
You contract to obtain the same rate of loss or return with (currently) a minimum $9000 balance in your account. A leverage of 19.26x
Want to make/lose faster? Buy/Sell 2 or 3 or 10 or more contracts.
In and Out costs $5.50 in fees and commissions for me per contract. Not the cheapest around.
Long or Short don't care no difference. Buy then sell or sell then buy.
Another little bonus:
In the United States, futures contracts are subject to the 60/40 rule. This advantageous tax treatment also applies to day trades and is broken down into two parts: 60% profits – taxed as long-term capital gains. 40% profits – taxed as short-term capital gains.