What does it mean to say that futures offer highly geared returns because the initial margin payment is much smaller than the price of the underlying asset?
Underlying: You invest 100 and price goes up to 105, you get 5 profit, or 5% return. Futures: Say your margin is 20 for 100 underlying, same price movements, you get 5 profit or 25% return. With gearing you get a bigger return (or loss) per initial capital injection. Get the picture?
