Why Investors Trade Futures

Page 1

BUSINESS

LegacyFX Introduction

Why Investors

TRADE FUTURES


WHY INVESTORS TRADE FUTURES THERE ARE A VARIETY OF REASONS WHY INVESTORS DECIDE TO TRADE FUTURES OVER OTHER TYPES OF INVESTMENTS. THIS INCLUDES DIVERSIFYING PORTFOLIOS, SPECULATING, SHORT SELLING, AND EARNING TAX BENEFITS.

Diversification By investing in futures contracts, investors gain access to types of assets that are not usually widely available in options, stock, and bond markets.


The 60/40 rule may apply to the returns from futures trading. In this rule, 60% of the returns are taxed as a longterm capital gain, whilst the remaining 40% is treated as a short-term capital gain.

Speculation

whilst the remaining 40% is treated as a short-term capital gain.

Some investors enjoy working with market speculation. These investors may be able to achieve more significant gains quicker than in other markets. However, they

Some investors enjoy working with market speculation. These investors may be able to achieve more significant gains quicker than in other markets. However, they could experience losses just as quickly too.

could experience losses just as quickly too.

Tax Benefits

Short Selling Short selling is the activity in which investors benefit from the stock market’s downward trends. When it comes to trading stocks, short selling often has higher required margins than longterm investments. With futures,

There are preferential tax rates that

however, the margin require-

some futures traders will qualify

ment is the same regardless of

for. The 60/40 rule may apply to

the position length.

the returns from futures trading. In this rule, 60% of the returns are taxed as a long-term capital gain,


For more information about futures trading, visit the LegacyFX blog.


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.