Compared to other tradable assets, we believe that futures are the best to trade for many reasons. In comparison to forex, or foreign exchange, futures tend to have higher effective leverage (via daytrading currency futures and using lower day margins) versus spot fx (for US based forex brokers). In addition, futures are much more transparent and regulated by the CFTC which generally allows for tighter bid-ask spreads in futures compared to forex regardless of market volatility. Stock options also provide a lot of leverage when compared to futures, however, there are other concerns in trading stock options such as theta, or time decay. An underlying stock price for an option can start the week at $10 and also end the week at $10, yet the price of the option associated with it will fall. This is due to the assumption of underlying stock price movement, or theta, that is baked into the price of a stock option. This is not a concern when trading futures. Additionally, if you want to day trade stock options (or stocks for that matter) you need to have a minimum account balance of $25,000 per the rules established by FINRA. The difference in day trading futures could not be more stark; futures traders are effectively encouraged to day trade since day margins are lower (which allows for more leverage), and there are also no futures account minimums established by any regulatory body.
In addition to all of that, we feel that investing in managed futures with a Commodity Trading Advisor (CTA) is much better than investing in a hedge fund due to the security of client funds. When a client invests with a hedge fund, they hand their hard earned money to the fund manager trusting that they will do the right thing with their wealth, and in the vast majority of cases they do. However, one only has to say the name “Madoff” to recognize how badly things can possibly go in this scenario. This is not a concern with managed futures since when you invest with a CTA, your funds remain in your account and you only authorize the CTA to trade the funds on your behalf. In other words, the CTA does not have the ability to withdraw or physically touch your money in any way, only you do, so your funds are 100% safe from a “Madoff” type of situation.