What is the main advantage of using futures contracts over buying stocks in the spot market?

Futures contracts offer higher liquidity. Futures contracts allow for leveraged trading. Futures contracts have lower transaction costs. Futures contracts provide dividend payments.

In the context of futures trading, what does the term 'margin' refer to?

The total value of the futures contract. The percentage of the contract value required as a deposit. The profit or loss made on a futures trade. The difference between the spot price and the futures price.

How does leverage impact the risk and reward of a futures trade?

Leverage reduces both risk and reward. Leverage increases both risk and reward. Leverage increases risk but reduces reward. Leverage reduces risk but increases reward.

What is meant by the term 'payoff structure' in futures trading?

The schedule of margin payments. The process of settling a futures contract. The potential profit or loss at different price points. The fees associated with futures trading.

Why are futures contracts often referred to as a 'zero-sum game'?

The total value of all contracts always equals zero. For every buyer who makes a profit, there is a seller who makes a loss, and vice versa. Futures trading involves no risk. Futures contracts have no intrinsic value.