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Lesson 5 of 8 · 2 min
Futures
A future is a bet on where a price will go. You put up a small deposit, but gains and losses use the full amount. That is leverage.
Try it
One contract controls $50,000 of an index. You put up a deposit (margin) of $5,000.
Index moves by+3%
−15%0+15%
Your deposit now (line = the $5,000 you started with)
Your result
Your $5,000 deposit became$6,500
+$1,500 · +30%The index moved +3%, but your deposit moved +30%. $5,000 in the index instead$5,150
+$150 · +3% What just happenedA 3% move in the index became a 30% move in your deposit. Leverage makes both gains and losses bigger.
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