Small margin requirements for futures contracts implies 1 th

Small margin requirements for futures contracts implies

1. the potential profit is magnified

2. the potential loss is magnified

3. the speculator\'s risk exposure is increased

4. the speculator\'s risk exposure is decreased?

Solution

4. the speculator\'s risk exposure is decreased, is correct answer

margin or profit required by speculator depends on the risk exposure which he is expecting to undergo.Speculator requires small margin or less margin if his risk exposure is less or decereased.