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Futures
Basic Knowledge

For the basic knowledge and trading mechanism of futures, please refer to the information provided by Investor and Financial Education Council.

*You should pay careful attention to the Liability Statement section on the homepage of the website of The IFEC at "www.ifec.org.hk" when referring to information using this link.

Trading Particulars
i.Hong Kong Futures
ii.Global Futures
Risk Disclosure Statements
i. Risk of Trading Futures

(a) The risk of loss in trading futures contracts is substantial.In some circumstances, you may sustain losses in excess of your initial margin funds.Placing contingent orders, such as “stop-loss” or “stop-limit” orders, will not necessarily avoid loss.Market conditions may make it impossible to execute such orders.You may be called upon at short notice to deposit additional Margin funds.If the required funds are not provided within the prescribed time, your position may be liquidated.You will remain liable for any resulting deficit in your account.You should therefore study and understand futures contracts before you trade and carefully consider whether such trading is suitable in the light of your own financial position and investment objectives.

(b) This brief statement does not disclose all of the risks and other significant aspects of trading in futures.In light of the risks, you should undertake such transactions only if you understand the nature of the contracts (and contractual relationships) into which you are entering and the extent of your exposure to risk.Trading in futures is not suitable for many members of the public.You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances.


ii. Effect of ‘Leverage’ or ‘Gearing’ of Futures

Transactions in futures carry a high degree of risk.The amount of initial margin is small relative to the value of the futures contract so that transactions are “leveraged” or “geared”.A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit.This may work against you as well as for you.You may sustain a total loss of initial margin funds and any additional funds deposited with the firm to maintain your position.If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position.If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit.


iii. Risk-reducing Orders or Strategies of Futures

The placing of certain orders (e.g. “stop-loss” orders, or “stop-limit” orders) which are intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders.Strategies using combinations of positions, such as “spread” and “straddle” positions may be as risky as taking simple “long” or “short” positions.


iv. Risk of Negative Price

Futures and options can be volatile instruments and may fall in value as rapidly as it may rise. Any individual futures or options may experience downward price movement, and may under some circumstances become valueless or negative in value. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling futures and options. Such losses may be substantial. I understand that I may be liable for unlimited losses based on the rise or fall in the price of the underlying assets.