RISK and futures

Discussion in 'Index Futures' started by Vienna, Jun 1, 2002.

  1. Vienna

    Vienna

    If you keep your stops and have correct position sizing relative to your capital (such as risking 1% per trade), are futures any more risky than stocks and why?
     
  2. The additional risk is that your account is not federally insured. If your position size is commensurate with a stock postion then I think the risk is about equal as far as trading goes.
     
  3. JayS

    JayS

    Forex can, Futures can't.
     
  4. Lose 10 cents on a 1000 shares (or reasonable daytrade stop?) or

    3 points on the NQ.

    The NQ just does it perhaps (then again maybe not) faster with more leverage offered.
     
  5. josbarr

    josbarr

  6. Trading emini S&Ps (2 contracts, $5K margin per contract) is like having $10K in a stock trading account at 10:1 margin.
     
  7. Vienna

    Vienna

    At the end of the day, what matters is how much of your capital you risk on a trade. Doesnt matter if the vehicle is Stocks, Options or futures.
    That means that if you have 100 k capital, the average stop is .15, you buy 10 contracts- you risk about 1.2% per trade, not more. Seems to me that the risk RELATIVE TO YOUR EQUITY stays constant as long as you keep your stop?
     

  8. If your stop (risk) is a fixed percentage of your capital then the risk is the same whether you trade futures or stocks.
    In fact, I would argue that, in Daytrading, futures have less risk as the added margin enables more efficient use of capital.

    1. With additional margin, you are able to spread your capital amongst various brokers, therefor reducing the risk of losing the whole wad if one broker goes belly up.

    2. With additional margin you can put some of your capital to a different use, eg Money Markets for some additional profit.


    If you use the argument that futures are more risky because you get 10:1 margin, then are stocks more risky since they went from 2:1 to 4:1. Margin does not define the risk, the 'use' of margin defines the risk.
     
  9. Vienna

    Vienna

    that's the way I understood it.
     
    #10     Jun 4, 2002