Trading commodity futures and perpetual futures involves substantial risk and is not suitable for every investor. Before trading, carefully consider whether it is appropriate for you based on your financial circumstances, experience, and risk tolerance.

You should be aware of the following:
 

Futures Trading Risks

1. Risk of substantial loss

You may lose all funds deposited with your broker to establish or maintain a commodity futures position. In certain circumstances, you may also incur losses greater than the amount initially deposited.

If the market moves against your position, your broker may require you to deposit additional margin funds on short notice. If those funds are not provided within the required time, your position may be liquidated at a loss, and you may remain responsible for any resulting account deficit.

 

2. No insurance protection in the event of broker insolvency

Funds deposited with a futures commission merchant for futures trading may not be protected by insurance if the futures commission merchant becomes bankrupt or insolvent, or if customer funds are misappropriated.

 

3. No SIPC protection

Funds deposited with a futures commission merchant are not protected by the Securities Investor Protection Corporation, even when the futures commission merchant is also registered with the Securities and Exchange Commission as a broker or dealer.

 

4. Limited clearing-organization protection

Customer funds are generally not guaranteed or insured by a derivatives clearing organization if a futures commission merchant becomes bankrupt, insolvent, or otherwise unable to return customer funds.

Some derivatives clearing organizations may offer limited customer-protection programs. You should ask your futures commission merchant whether any such protection applies and understand its benefits and limitations.

 

5. Customer funds may be commingled

Funds deposited with a futures commission merchant are not necessarily held in an individual account solely for your benefit.

Futures commission merchants may combine customer funds in one or more accounts. As a result, you may be exposed to losses caused by other customers if the futures commission merchant does not have sufficient capital to cover those losses.

 

6. Investment of customer funds

A futures commission merchant may invest customer funds in certain financial instruments approved by the Commodity Futures Trading Commission.

Permitted investments under Commission Regulation 1.25 may include:

• U.S. government securities

• Municipal securities

• Money market mutual funds

• Certain corporate notes and bonds

The futures commission merchant may retain interest or other earnings generated from those investments. You should understand the types of instruments in which your customer funds may be invested.

 

7. Deposits with affiliated entities

Futures commission merchants may deposit customer funds with affiliated entities, including affiliated banks, securities brokers or dealers, and foreign brokers.

You should determine whether your futures commission merchant deposits funds with affiliates and consider whether those arrangements create additional risk.

 

8. Safeguarding customer funds

You should consult your futures commission merchant regarding the protections available for funds or property deposited in your trading account.

 

9. Liquidity and liquidation risk

Under certain market conditions, it may be difficult or impossible to liquidate a position.

This may occur during extreme volatility, low liquidity, trading interruptions, or when a market reaches a daily price fluctuation limit, sometimes referred to as a “limit move.”

No 24/7 Market Access

 

10. Restricted access to certain markets

NinjaTrader may restrict market access and may not provide 24-hour trading that corresponds with the trading hours available through markets such as Coinbase.

As a result, a position may remain exposed to market movements during periods when you are unable to trade or manage the position through NinjaTrader.

 

11. Spread positions also involve risk

All futures positions involve risk. A spread position is not necessarily less risky than an outright long or short position.

Perpetual Futures Risks

 

12. Additional risks of perpetual futures

In addition to the risks associated with traditional futures and derivatives trading, perpetual futures involve risks created by their unique structure.

Funding-rate costs

To help keep a perpetual futures contract aligned with the underlying spot-market price, funding payments may periodically be exchanged between long and short position holders.

A trader who consistently holds a position that is out of consensus with the broader market may be required to make repeated funding payments. These costs can accumulate, reduce profitability, erode maintenance margin, and potentially contribute to a margin violation or automatic liquidation.

No expiration date and market crowding

Traditional futures contracts have expiration dates that require positions to be closed or rolled and help promote price convergence.

Perpetual futures do not expire and may remain open indefinitely. This structure can encourage prolonged speculation, large directional imbalances, increased market crowding, and more volatile or disorderly conditions during sharp market moves.

Leverage risk

Perpetual futures may allow traders to control positions that are substantially larger than the amount of capital deposited.

For example, using 10-to-1 leverage, a trader may control a $10,000 position with $1,000 in capital.

Leverage can increase potential gains, but it also amplifies potential losses. The high degree of leverage commonly available in futures trading can work against you just as quickly as it can work in your favor.

Selecting a Futures Commission Merchant

 

13. Review your futures commission merchant carefully

You should carefully evaluate the futures commission merchant selected to hold your funds and process your futures transactions.

The Commodity Futures Trading Commission requires futures commission merchants to publish firm-specific disclosures and financial information on their websites. This information may help you evaluate the financial condition and customer-protection practices of a futures commission merchant.

Information regarding NinjaTrader Clearing LLC may be found through its Safety of Customer Funds disclosure.

NinjaTrader Clearing LLC is a non-clearing futures commission merchant and therefore uses clearing firms to settle customer transactions with futures exchanges.
 

Information regarding its clearing futures commission merchants may be obtained through:

• Dorman Trading

• Advantage Futures
  
   

Educational Use Only

F-1 Trading provides trading tools, indicators, educational information, and market-related content only.

Nothing presented by F-1 Trading should be considered financial, investment, tax, legal, or trading advice. No trading result is guaranteed, and past performance is not indicative of future results.

Only trade with risk capital that you can afford to lose.