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To: peter n matzke who wrote (42788)	5/9/1998 6:18:00 PM
From: Tom Trader	Respond to of 58727

>>i have not signed up with a futures broker, there was something about 20 pages of warnings and disclaimers about bankruptcy, and how the house may trade against its client that scared me.<< Peter, far be it for me to suggest to anyone that they should trade futures--but the information that you received is both reflective of the high risks that futures trading entails as well as some boiler-plate language intended to protect the brokerage company. In actual fact, IMO it is easier to be successful trading futures than trying to make money trading options on the long side--because of the erosion of premiums with time and the spreads that one faces with options. Given the current evolution of this thread into a forum for trading futures, among other things--and in view of the declared interest of some on this thread and others who have sent me private messages regarding futures trading--I am listing a few questions that any prospective futures trader should ask himself/herself before embarking in this direction. If you anwer "no" to any of these questions, then I would suggest that S&P futures trading is not for you: --Do you have $50K of risk capital available to trade futures? --Are you in a position to lose half of that and it not affect your security, peace of mind, etc? --Can you make fairly objective decisions as to why you are entering and exiting trades? --Do you have a plan/system for trading futures? --Do you have the discipline to FOLLOW a plan when trading? --Can you accept that losing trades are part of the business of trading? --Do you cut losses short or let them run in relation to your current trading? --Is your personality such that you can accept rapid fluctuations in the value of your positions? I am sure that there are other questions that may be relevant but IMO, if one cannot clear the hurdle and answer "yes" to each of these questions, trading futures would be a mistake. As far as the risks entailed in trading futures, the reality is that it is a risk caused not by volatility as much as leverage. On Friday the range on the futures was just over 1 1/2% -- which is nothing compared to the range on many NAZ stocks that we talk about on this thread. The difference is the leverage--when you trade the futures, $12K or so controls about $300K of stocks making up the SPX. Imagine if one had to put $12K forward to control $300K of DELL---that is over 3000 shares of DELL controlled by $12K--any movement in DELL would impact the value of your portfolio substantially. Well it is the same concept with the S&P futures--but less volatile for the most part than DELL but still capable of a large impact very quickly. The SPX is not as volatile as many NAZ stocks but the leverage is such that small moves can have a big impact. In fact, on Friday, some one going short from the previous day and holding to the short position would have seen a loss of over $4K per contract -- which is about a third of the initial margin requirement. So while futures trading is rewarding and perhaps enticing, I would urge anyone contemplating it to think about it carefully, before embarking on it. Remember about 85-90% of futures traders lose money --but it is a zero-sum game and the remaining 10-15% make all the money that the rest of the traders lose--and therein lies the attraction which got me into trading futures in the first place. cme.com