The advantage of futures hedging is that it is liquid and can be traded in the central market. This means that futures can be bought or sold quickly on the central market. This is because futures contracts can be traded in the central market where there are many market participants. When there are many market participants trading futures in the central market, the level of liquidity will increase because many market participants will enter and exit both long and short positions. This will make market participants buy and sell futures more easily in the central market. Furthermore, this will make the trader easily close their position by simply making a reverse transaction in the central market. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Next, the benefit of hedging using futures includes leverage. This means that by placing a small deposit value on traded assets, you can significantly amplify your gains (or losses). This is because the margin system serves the function of allowing the trader to take a larger position by depositing only a small initial deposit or margin value. For example, a futures contract with a value of $1,000,000 has an initial margin of $100,000, with each percentage change in the futures price, would cause a change of approximately 10% from the trader's initial cost. This magnifying of gains (or losses) is called leverage. This leverage will offer the trader the ability to hedge larger amounts using a lower cost. Besides that, the advantage of hedging using futures includes that the position can be closed easily. This means that the trader can exit or exit a long or short position without consuming much time and effort. According to (Ben-David), this is because when a trader wants to close his position in the market, he can simply make a reverse trade at any time before the expiration date in the market and close that position. . For example, if a trader wants to exit a position and has sold $10 futures contracts expiring in June, then he can make a reverse trade of buying dollar futures from June 10 to close that position. .The benefit of futures hedging also includes convergence. This means that when the futures contract is close to the expiration date, the futures price and the spot price will move closer to each other. In other words, the futures price and the spot price will tend to converge when the futures contract is close to the delivery date. For example, when the futures price is higher than the spot price, the futures price will decrease to meet the spot price, while the spot price will increase to meet the futures price. Therefore, on the expiration day or the delivery day, both prices must be the same. This convergence arises from the activity of arbitrageurs when they notice price inequalities between futures and spot and intend to make a profit. For example, buy the cheapest one and sell the most expensive one. Disadvantages of Futures Hedging The disadvantage of futures hedging includes that it is a legal requirement. This means that there is an obligatory act for which the owner is required to perform it. This is because futures are a contract and require the holder to perform their action as stated in the contract. This legal obligation may cause some difficulties for the business community. For example, if hedging is done via futures for a.