Due to their relatively high risk and complexity, futures are not suitable for beginner or inexperienced investors. When opening a DEGIRO account, you therefore cannot directly trade futures. You will need an Active or Trader account, which comes with additional appropriateness tests and terms and conditions.
You have to deposit initial margin to enter into a futures contract. The amount of margin required is a percentage of the contract value. At DEGIRO, you can find the risk category of a product next to its name, representing how much margin will need to be deposited to enter the contract.
Futures are standardised contracts that, like options, are made between two parties at a fixed price and expiry date. It is a contract to deliver an underlying product at an agreed time in the future at an agreed price.
Unlike other financial products such as stocks, with futures, you do not pay the full cash amount upfront or own the underlying product. Instead, you deposit initial margin to enter the futures position. Since only a percentage of the contract’s value needs to be put up initially, futures are highly leveraged financial instruments. This means that slight price movements can have a large impact.
Want to find out more? Read our article on futures.Open an account
Due to their relatively high risk and complexity, futures are not suitable for beginner or inexperienced investors. Investors that choose to invest in futures can bear a loss of capital and generally have a shorter investment horizon. Even for the most experienced investors, losses can be substantial.
If you are a beginning investor, it is best to start off with basic financial products, such as stocks, bonds, exchange-traded funds (ETFs) and investment funds. With these, potential losses are limited to your initial investment.
Investing in futures can help with risk management and speculation. In terms of risk management, investors can use futures to hedge price movements of the underlying product. On the other hand, speculators can use futures to profit from price movements of the underlying product.Open an account
Investing in futures can be rewarding, but it comes with high risk. You can end up losing more than your initial investment. In some cases, the maximum loss is unlimited. We recommend only investing in financial products that match your knowledge and experience and only entering into obligations that you can meet with money that you do not need in the short term.
A unique feature of futures is that they are settled daily. At the end of each trading day, the closing market price is determined by the exchange that the future trades on. This is known as the daily mark-to-market (MTM) price, and it is the same for everyone. There are daily mark-to-market settlements until the expiry of the contract or the position is closed out.
The payment for a futures contract is made at the end of the agreed term. This can be done by physical delivery or a cash settlement, but cash settlement is more common.
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