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John,
One does not have to be leveraged to have a position in futures. Can can
allocate the full cash value. For example, if a Soybean contract is for
5,000 bushels and the priice is $5, the full underlying value is $25,000.
One can allocate the full underlying value and virtually reduce leverage to
zero. One does not have to buy a farm or elevator to reduce leverage to
invest in Soybeans. However it is probably true that if one takes a long
term view on the futures markets, the number of transactions is likely to
drastically drop. This will thereby drastically reduce the income of the
futures account rep. I can see why you may be inclined to discourage this
approach.
Best Wishes,
Norman
----- Original Message -----
From: <I4Lothian@xxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, July 18, 2001 6:38 PM
Subject: Re: [RT] Leverage Capital in Soybeans
> Bruce:
>
> No, I am not a bean counter. I am a broker. A futures broker. I have no
> problem with you or other people trading futures. That is what I do for a
> living. But it must be appropriate for the individual. I do not believe
> that futures trading is an appropriate vehicle for college savings. Sure
> there are exceptions.
>
> Futures trading is something that should fit into the scope of a larger
> portfolio. It is something that only risk capital should be used to do.
> Most kids saving for college don't have a portfolio that would support
taking
> on highly leveraged futures market risk. Certainly there are other higher
> risk endeavors that would not be appropriate for college savings programs
> either.
>
> As for investing in futures, I would suggest a managed futures program; an
> individually managed account or a futures fund. Pick something with a
proven
> track record. And stay away from those using chicanery to make themselves
> look like they are more than they really are.
>
> If you want to invest in soybeans, or some other commodity, I would
suggest
> becoming a farmer or producer. If you are speculating on futures, you are
> trading not investing. If you are investing, you are probably carrying a
> loser.
>
> Regards,
>
> John J. Lothian
>
> Disclosure: Futures trading involves financial risk, lots of it! John J.
> Lothian is the President of the Electronic Trading Division of The Price
> Futures Group, Inc., an Introducing Broker.
>
>
>
> \In a message dated 7/18/01 1:13:01 AM Central Daylight Time,
> bruce.larson@xxxxxxxxxxxxx writes:
>
> << John, you sound like a true bean counter. I keep my money in money
> markets and use a small portion (risk capital) to trade. If I want
> to own bonds, I can keep the money in a money market account and buy
> bond futures. In fact I can leverage at the implied repo rate which
> is far lower than my money market account return. The futures market
> is far more liquid than trying to buy/sell cash bonds through a
> broker. The bid/offer is tighter, the commissions are far cheaper
> and I can pretty much guarantee myself instat fills. You may think
> futures is inappropriate as an investment vehicle but there are valid
> reasons which make it far safer than certain cash instruments such as
> tech stocks. >>
>
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