Analysis of "trading futures vs stocks" in volatile markets shows futures bringing more transparency to risk metrics. Unrealized PnL swings are immediately marked-to-market, giving traders clearer intraday capital requirement planning than holding spot equities. Better Energy Stock: Oklo vs. Nextracker was originally published by The Motley Fool To put it plainly, gold ETFs don’t provide leverage. Some securities brokers may loan you 50% of the money to purchase stocks or ETFs, but similar to any loan there are costs associated with this. A unique feature of futures contracts is the ability to use leverage, which is built into each contract via the margining and the daily mark-to-market mechanism. Brokerage firms extend the Exchange enforced minimum margin requirements along to their customers and manage the daily margining of their customer accounts. Margin can sometimes represent as little as 3%t of the notional value of the contract. This is a tremendous advantage for investors who wish to use leverage to take advantage of a specific opportunity in the market. However, unlike stocks, futures margin is not partial payment or a down payment for the purchase of the underlying asset, it is simply “good-faith money.” This money is placed on deposit to guarantee that each participant has the ability to perform to the terms of the contract and withstand the average daily price fluctuation of the underlying asset and is returned upon exiting a position. Brokerage firms constantly monitor margin balances and update account balances to reflect changes in market prices at the end of each day. When market conditions change, the Exchange may amend the required margin to trade that market, but there is never a need to borrow money from a broker nor are there fees associated with using this margin. From a macroeconomic viewpoint, "trading futures vs stocks" tends to adjust quicker to geopolitical flashpoints. Futures on the Dow reacted within minutes to recent policy announcements, while conventional stock trades showed delayed absorption of impact.
