Unlimited Risk


DEFINITION of 'Unlimited Risk'

The risk of an investment that has unlimited downside potential.

BREAKING DOWN 'Unlimited Risk'

Examples of investments with inherent unlimited risk include short positions and futures contract trading. In short selling or trading futures contracts, the potential to lose more than your initial investment is theoretically infinite.

  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Short Selling

    Short selling is the sale of a security that is not owned by ...
  4. Return

    The gain or loss of a security in a particular period. The return ...
  5. Beta

    Beta is a measure of the volatility, or systematic risk, of a ...
  6. Futures

    A financial contract obligating the buyer to purchase an asset ...
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  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  3. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  4. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>

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