Future trading options are quintessentially derived from financial assets encompassing traditional stocks, bonds, stock indexes, and more. Hence, Futures and Options brokers can help you gain more financial exposure that includes stock, indexes, currencies, and commodities. Futures contracts have indeed some greater advantages over trading stocks. Let us have a look at the potential advantages of Futures trading.

Futures Are a Comparatively High Leveraged Investment

In general, the investor has to put a margin for trading Futures. Commodity brokers in Chicago essentially charge 10% of the contract value as collateral. In case, the market goes wrong they can incur the losses from the prepayment. Trading Futures essentially refers to a greater value than the amount of original stock. Hence, the profit would generally multiply if the market goes up.

Very Liquid Market

Futures contractors are traded massively every day. Therefore, the futures market is very liquid. With the constant presence of buyers and sellers the market is very active. Moreover, the price does not fluctuate drastically. In addition, a large position in the market can be cleared without adverse impact on price. The best part is the traders can trade beyond the traditional trading hours.

Commission Costs Are Low

Futures and options brokers generally charge as low as 0.5%. As the commissions in Futures trades are very minimal, the investors can make more profit out of their investments. However, the brokerage charges often fluctuate and it essentially depends on the level of service. In general, the online trading commission varies around $5 and full-service brokers charge around $50 for each trade.

Offers Multiple Diversifications

Futures trading are critical vehicles to hedge and manage different kinds of risks. Organizations that deal with foreign trade use Futures for managing foreign exchange risks, and interest risks. In fact, they anticipate a drop in rates if they find any sizable investment. Their price risks generally involve the fluctuating prices of commodities like oil, crops, and important metals. Therefore, Futures and other derivatives help increase the efficiency of the underlying market.

More Efficient and Fair

Insider trading is another crucial component of the trading market. However, unlike single stocks Futures market tends to aggregate the trade market that doesn’t involve insider trading. That’s the prime reason, the Futures market can be considered more efficient and fair.

Involves Paper Investment Only

Futures investment options are usually paper transactions for investors. It means Futures trading options are less cumbersome than having individual stocks. The latter involves electronic records and the companies essentially keep a track of their shareholders for paying dividends. Futures trading options are more progressive and advanced.