What are the pros and cons of investing in future contacts? Be specific and in response.
Pros of investing in futures are as follows:-
1) There is no counterparty risk due to the presence of clearing house.
2) All the contracts are standardized contract, and provides consistent pricing for all the participant.
3) It helps in hedging risk.
4) Requires less money to start the investment due to the presence of margin.
Cons of investing in futures contract
1) It may not provide favouable contract size and expiration date as per required by investors.
2) Initial margin required is higher for new trader.
3) As it works on margin , this means that they provide leverage leading to increase in risks.
What are the pros and cons of investing in future contacts? Be specific and in response.
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