====== Leverage ======

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Leverage is the ability to control a large contract value with a relatively small amount of capital. In the futures market, that capital is called performance bond, or initial margin, and is typically 3-12% of a contract's notional or cash value.

On April 28, to express his market view, a trader sells one July 2023 contract (ZSN3) at 1413’0/bushel (USD 14.13), which gives the contract a notion value of USD 70,650. He deposits USD 5,000 margin on his futures account. At 7.1% of the cost, he participates in price exposure for 5,000 bushels of soybeans. The use of leverage, in this case by 12.6 times, is an advantage of cost-effective trading with futures contracts.

[[https://www.cmegroup.com/education/courses/understanding-the-benefits-of-futures/the-power-of-leverage.html|The Power of Leverage (CME Group)]]