Day Trading Futures

Written by Erin Jones
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Day trading futures can act as great addition to the high-risk portion of your portfolio. Many investors simply fail to realize the opportunities involved in futures trading. It is arguably the best arena to achieve the highest gains among risky investment classes. For example, a biotechnology investor will speculate on the approval of a novel drug. The risk is that the drug does not receive approval and the stock tumbles, or on the other side, it does receive approval and it the price doubles. The good news is that there are much better alternative bets.

Better Returns with Day Trading Futures

In the above example, investors are waiting for a single event. The pitfalls associated with this strategy are: no leverage, the inability to leverage, and the time wasted looking for the home run. If the stock doubles in three years, it only yields approximately 20 percent annual average returns. Those odds are not that great for such a dismal return.

The futures market allows you to speculate on a much more reliable event, for example the appreciation of the S&P 500, with much greater leverage. With a 50 to one leverage potential, the likelihood of doubling your investment in the short-run is much higher. The appreciation of many Fortune 500 companies is a much likelier event than a wonder-drug approval.

In sum, the futures market can act as a great tool for managing your capital risk. It is arguably the best arena for lofty speculation. Most investors will find it easier to follow, and also more exciting than the alternatives.


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