All Futures Contracts Are Traded on a Margin Basis

question 19

Essay

All futures contracts are traded on a margin basis. What does "margin" mean, and how does the use of margin affect the inherent risk-return nature of the futures market?

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Definitions:

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts and the funds invested in any kind of asset.

Stock Market

The stock market is a collection of markets where stocks (shares of ownership in businesses) are bought and sold, reflecting the economic health of a country.

Corporation

A legal entity recognized by law as a separate entity from its owners, capable of holding assets, borrowing money, and being sued.

Bondholders

Individuals or entities that hold debt securities typically issued by corporations or governments, entitling them to repayment of principal plus interest.