Financial Markets For The Rest Of Us An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds |
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The same margin rules also apply to selling contracts. For example, when you sell ten gold contracts at $310/oz., don't expect to receive $310,000 in your account (unless you actually own that much gold and it is registered with the clearing house for this purpose). You would once again require an initial margin in your account and your account must stay within the required maintenance margin to insure against potential losses if gold prices rise. And yes, you will receive the dreaded margin call from your broker if those contract prices rise beyond a certain point. As you can see from the above example, margin gives you leverage, translating to large profits or losses given small price movements in the underlying commodities. You will never be able to realize such high … |
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