when buying or selling a future contract, the trader commits what amount of funds

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When a traders enters into a Future Contract (be it Buying or Selling), the Delivery of the Underlying Asset does not takes place.
Hence it does not require the Entire Amount at the time of Entering the Contract.
However to be on a Safer side , the Brokers demand an "INITIAL MARGIN MONEY" at the time of Entering into Futures Contract so that in case of Default by his Client, he can recover the loss.
Such "Margin Money" is just a type of Deposit which will get refunded at time of Maturity of Future Contract if Trader is in Profit. On the Otherhand, any loss will be adjusted from such Margin Money.
The "percentage of Initial Marging Money" is very Less as Compared to the "Total Contract Amount" therefore proving with a "LEVERAGE EFFECT" to the Trader where in he can enter into Futures Contracts which are approximately Twice the Value he Holds in his Account.
There is another Margin Requirement on Trader of Futures Contract. It is known as "MAINTENANCE MARGIN". It is not any amount "Over & Above" Initial Marging. But it is a type of a "cut off point" already set by the Broker below which if our Initial Margin Fall at any time during a Future Contract Period THEN we have to fill such shortage within specified time.
So to sum up everything in Short, there is No Cost as such to enter into a Forward Contract.

jeff jeffy answered 1 year ago

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