How can you lose more than everything you put up?
Ask "how much can I lose?" about a share and the answer is "everything you invested." Ask it about a futures contract and that answer is simply wrong. The reason is arithmetic, not misfortune.
Your obligation is the notional, not the margin
Buy $6,000 of a stock and $6,000 bounds your loss — the price can go to zero and stop. Post $6,000 of margin against one crude contract and you have taken on the price behaviour of $80,000 of crude oil. Margin sized your collateral. The contract sized your exposure. Nothing anywhere caps the exposure at the collateral.
Run it out on one contract, entry $80.00, margin $6,000:
- Crude at $84.00 → P&L +$4,000 → account $10,000
- Crude at $80.00 → P&L $0 → account $6,000
- Crude at $76.00 → P&L −$4,000 → account $2,000
- Crude at $74.00 → P&L −$6,000 → account $0
- Crude at $70.00 → P&L −$10,000 → account −$4,000
- Crude at $65.00 → P&L −$15,000 → account −$9,000
Below $74 the account is not merely empty. It is negative — a debit balance, a genuine debt owed to your broker, on top of having lost everything you deposited.
This is not theoretical
Gaps do happen and they skip past every stop and liquidation level on the way. April 2020 saw the expiring WTI contract settle below zero. January 2015 saw the Swiss franc move so far, so fast, that accounts and brokers alike went to negative balances in minutes. These events are rare individually and unremarkable collectively — every leveraged market produces one eventually.
Why stop orders are not a guarantee
A stop order becomes a market order when its level trades. It promises execution, not price. Futures markets gap: limit-up and limit-down halts pause trading entirely, overnight sessions run thin, and a contract can open $5 away from yesterday's settlement with nothing tradeable in between. The distance between the price you wanted and the price you got is slippage, and it is systematically largest in exactly the moves where the stop mattered.
Forced liquidation is the normal failure mode
Failing to meet a call is not a warning shot; it is an event with an immediate consequence. The broker closes the position at the market, at a time of their choosing, and the loss crystallises. A completely correct thesis dies here just as easily as a wrong one, because daily settlement tests your solvency on every single day between now and the day you would have been right.
The plain statement
Futures are leveraged instruments. Because your obligation is the full notional while your collateral is a fraction of it, losses can and do exceed the initial margin, leaving a debit balance you are legally obliged to pay. Daily settlement can force the liquidation of your position at a time and price you do not choose — including in a market that later moves in your favour. Stops do not guarantee prices. Margin requirements can be raised mid-position.
These are not edge cases. They are ordinary properties of the instrument, and they are why futures are professional risk-transfer tools rather than a place to learn. This course teaches you to read futures markets accurately. It does not suggest you take a position in one, and nothing here is investment advice.
Try it now
- Continuous WTI over the longest window this page holds is below. Find the worst five-day stretch you can and Measure it. Do not settle for the first candidate — there are several, in several different decades.
- Convert that percentage into dollars per contract using the notional.
- Express it as a multiple of a 7.5% initial margin. For most commodities in most decades, the answer is greater than one — which is the whole lesson in a single number.