A:

The basic fees involved in trading futures contracts are brokerage fees, clearing fees and settlement fees.

Futures trading is an alternative investment that offers very high leverage for traders. Trading futures contracts does not require investing the full value of the contract. Traders only put up a small amount of margin to hold a position in the market, typically no more than 10% of the actual value of the contract. In addition to having the necessary trading capital, traders also have to pay certain fees on each trade they make.

The primary costs involved in futures trading are brokerage fees. Brokerage fees vary substantially between full service brokers and discount brokers. In addition, different brokers calculate the fees they charge in different ways. Some brokers charge a flat fee per buy/sell transaction. Other brokers charge a fee per transaction side; that is, a fee is charged when a trading position is opened, and another fee is charged when the position is closed. Other brokers determine fees on a percentage basis, charging a percentage of the total value of the order. Finally, some brokers' charges are set up with both a flat fee charged and then an additional percentage fee based on the size of the order.

Some futures traders, rather than trading directly themselves, prefer to use a managed account that is traded by a futures trading adviser or money management professional. A managed account incurs management fees in addition to trading fees. These fees may be charged either as a flat fee, a percentage of total capital invested or a percentage of profits.

The various exchanges on which futures contracts are traded charge clearing and settlement fees. However, these fees are usually insignificant, commonly totaling no more than a dollar or two per contract traded.

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