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5:00Futures Margin: The Daily Cash Machine
A futures contract is not paid for up front and never carries a loss overnight. Every single evening the clearing house tears the trade up, re-prices it, and moves real cash between winners and losers before the next day begins.
When you buy a futures contract you do not pay the contract's value. Instead you post a good-faith deposit called initial margin (CME calls it a performance bond), typically only 3-12% of the contract's notional value. That leverage is the whole appeal and the whole danger: a small price move is large relative to the cash you put down.
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