Why are index futures considered riskier than stocks? They can't go out of business like stocks do.
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Futures riskier than stocks?
- Thread starter short&naked
- Start date
I think stock index futures, ES for example, are less risky than individual stocks if the trader/investor FULLY understands leverage. Just as people thought it was wonderful to buy a house for only 5% down, with little money in reserve, never considering the result if house prices were to go down 30%.
So,
PROS: liquidity
diversification
trade 24/5
low commission
quick entry or exit
don't have to study individual stocks
CONS: must fully understand the use of leverage
I think requires more knowledge of macroeconomics
So,
PROS: liquidity
diversification
trade 24/5
low commission
quick entry or exit
don't have to study individual stocks
CONS: must fully understand the use of leverage
I think requires more knowledge of macroeconomics
I think any market is risky if you are inexperienced or uneducated for that market or instrument. I read almost every week here on ET of how some guy/gal opening an account to start trading, but they don't have a clue as to how to trade and come here for guidance so they can start on Monday. I think to myself "fresh meat" and they will be offering their account to those who understand the risk and habits of the instruments we trade.
I been trading commodities/futures 24 years and I fully understand them as an leaverged instrument, but I don't view them to be more risky than stocks, options, EFTs or mutual funds.
I believe Risk = Education
Handle
I been trading commodities/futures 24 years and I fully understand them as an leaverged instrument, but I don't view them to be more risky than stocks, options, EFTs or mutual funds.
I believe Risk = Education
Handle
cat you are wrong, wrong and...wrong...stocks are "Babies" compared to futures in regards to risk...with stocks, you can not incur a debit...meaning: say you are long 5 ES contracts and market tanks 400 ES points and you only had like $6k and were trading $500 margins...YOU OWE ALL OF THIS TO YOUR BROKER...
if you lose $6k in stocks...thats all folks...no debit is possible...same with options...please do more research...
if you lose $6k in stocks...thats all folks...no debit is possible...same with options...please do more research...
Quote from increasenow:
cat you are wrong, wrong and...wrong...stocks are "Babies" compared to futures in regards to risk...with stocks, you can not incur a debit...meaning: say you are long 5 ES contracts and market tanks 400 ES points and you only had like $6k and were trading $500 margins...YOU OWE ALL OF THIS TO YOUR BROKER...
if you lose $6k in stocks...thats all folks...no debit is possible...same with options...please do more research...
Both of the above responses said that one must FULLY understand leverage. Isn't that what you are trying to say?
ah...not really...I can totally understand leverage and make wrong trading decisions and still get hit with a massive debit...you can totally "understand" that the "Stove is hot" but still get burnt...Quote from Stosh:
Both of the above responses said that one must FULLY understand leverage. Isn't that what you are trying to say?
Quote from increasenow:
ah...not really...I can totally understand leverage and make wrong trading decisions and still get hit with a massive debit...you can totally "understand" that the "Stove is hot" but still get burnt...
Okay. One must fully, thoroughly, and completely understand leverage and totally comprehend all of its possible consequences, implications, and ramifications, both intended and unintended and must realize that there is always the chance of the perfect storm, black swan, and purple duck.
No, he is right, right, right. Risk comes from not knowing what you are doing. A debit account in stocks IS possible. Tell this to people who held BSC or ELN overnight with leverage. They woke up to a big fat negative number. Again, risk comes from not knowing what you are doing and not understanding the risks of the instruments you trade.
Quote from increasenow:
cat you are wrong, wrong and...wrong...stocks are "Babies" compared to futures in regards to risk...with stocks, you can not incur a debit...meaning: say you are long 5 ES contracts and market tanks 400 ES points and you only had like $6k and were trading $500 margins...YOU OWE ALL OF THIS TO YOUR BROKER...
if you lose $6k in stocks...thats all folks...no debit is possible...same with options...please do more research...
Quote from Stosh:
Okay. One must fully, thoroughly, and completely understand leverage and totally comprehend all of its possible consequences, implications, and ramifications, both intended and unintended and must realize that there is always the chance of the perfect storm, black swan, and purple duck.
And now you understand why it is the job of politicians and government to enact things to protect the citizenry from things that they can't possibly understand.
Quote from obama-lama:
And now you understand why it is the job of politicians and government to enact things to protect the citizenry from things that they can't possibly understand.
Touch'e. But I thought that was taken care of in the application approval process at the futures broker, LOL.