Leverage

What this video covers

• Why a trader can control $100,000 of commodities with only a $5,000 performance bond deposit, and what that 20-to-1 leverage ratio actually means
• How to calculate percentage return against the performance bond, not the notional value, and why that small denominator creates explosive swings
• Why leverage is symmetric, magnifying profits and losses to exactly the same degree, and why losses can exceed the initial deposit
• What happens when a 10% adverse move wipes out a $5,000 deposit and still leaves the trader owing additional funds
• Why a futures performance bond is a security deposit, not a down payment, with no borrowing, no interest, and no ownership involved
• How futures margin differs from securities margin in purpose, posting requirement, and economic substance
• How to spot and eliminate wrong answer choices that import stock margin concepts like loans or interest into futures questions