If you are bearish on , you can profit from a fall in price by taking up a short position in the futures market. You can do so by selling (shorting) one or more futures contracts at a futures exchange.
Example: Short Futures Trade
You decide to go short one near-month Futures contract at the price of 0.0000/. Since each futures contract represents 0 s of , the value of the contract is 0.0000. To enter the short futures position, you have to put up an initial margin of 0.0000.
A week later, the price of falls and correspondingly, the price of futures drops to 0.0000 per . Each contract is now worth only 0.0000. So by closing out your futures position now, you can exit your short position in Futures with a profit of 0.0000.
|Short Futures Strategy: Sell HIGH, Buy LOW|
|SELL 0 s of at 0.0000/||0.0000|
|BUY 0 s of at 0.0000/||0.0000|
|Investment (Initial Margin)||0.0000|
|Return on Investment||NaN%|
Margin Requirements & Leverage
In the examples shown above, although prices have moved by only 10%, the ROI generated is 0%. This leverage is made possible by the relatively low margin (approximately 0%) required to control a large amount of represented by each contract.
Leverage is a double edged weapon. The above examples only depict positive scenarios whereby the market is favorable towards you. If the market turn against you, you will be required to top up your account to meet the margin requirements in order for your futures position to remain open.
Learn More About Futures & Options Trading
- Futures Basics
- Buying Futures to Profit from a Rise in Prices
- Hedging Against Rising Prices with Futures
- Hedging Against Falling Prices with Futures
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