A deposit is not the size of your exposure
Futures margin runs 2 to 10 percent of contract value and is a performance bond. One E-mini at 2,250 is $112,500 of exposure on a few thousand dollars.
Risk mechanics · 8 guides
Risk mechanics.
Work through losses, leverage, liquidity and the costs behind an outcome. Start with a question and work through the explanation at your own pace.
A margin call can end in liquidation
FINRA sets a 25% maintenance floor and brokers commonly run 30 to 40%. Below it the firm can sell your positions without calling you first.
Daily reset ETFs: why the path matters
An index down 10% then up 10% ends at 99; a 2x daily fund ends at 96 and a 3x at 91. The multiple is promised for one day, not the holding period.
Five holdings can still mean one concentrated bet
A 504-stock S&P 500 fund still holds 37.83% in information technology. Concentration is a share of the account, not a count of tickers.
Leverage changes the size of a move
Regulation T lends half a stock's price, so a 10% fall costs 20% of equity. FINRA Rule 4210 sets the 25% floor; brokers commonly use 30 to 40%.
Risk tolerance and ability to absorb loss differ
The SEC defines risk tolerance as ability and willingness. Ability is arithmetic: months of cash, the date the money is needed, and a $3,000 tax cap.
What a stop order cannot promise
A stop price is a trigger, not a fill price: at the stop the order becomes a market order. A gap from $52 to $41 fills 18% below a $50 stop.
Your gross result is not your net result
A $50,000 sale carries $1.03 in Section 31 fees and $0.17 in FINRA trading activity fee at $0 commission, plus spread and tax. Here is the subtraction.