http://www.zerohedge.com/article/an...-7-days-raises-initial-maintenance-margins-12 I still remember the first time I traded silver. Margin was about $1,300 back then. I remember have a small $5k account and holding 3 contracts. There was a big spike down of 25 cents and I got my first margin call. Back in those days we were still getting automated quotes off the telephone. Everytime you wanted to know the price, you have to push the code for silver. Prices didnt move so fast like they do today. We also got killed on commissions back then. I was paying $45 per RT per contract at a DISCOUNT broker. (some people paid as much as $135 per contract at the normal brokers)
These daily margin hikes are bullshit, imo. Somethings up. Who cares if silver trades above 50 dollars? What does it matter unless big interests stand to lose?
I remember these days too in index futures. Entering trade, you are starting with $-100. Nikkei contract commision was $500. My first attempt at trading and managed +50%. Was not enough though as undercapitalised. Markets changed a lot.
---------------------------------------------------------------------------------- Anticipation for probability to contagion. "As Silver is a thinly traded market, one thing the CME could do is to raise margin requirements for Silver speculators; otherwise risk is setting up the silver market for an record-setting crash, which could impact many other markets in the process of correcting, especially other commodities like Gold and Crude Oil." (SNIP) "With the advent of commodity funds, silver is part of the basket of commodities in the funds. Also, because traders will not want to fight the tape, shorts will come in and take advantage of the selloff in Silver to push other commodities down through ETF trading vehicles. Moreover, the same banks and hedge funds trading silver are also involved in the major commodity groups as well, and they will be liquidating other positions to keep their portfolios balanced with regard to risk. So expect a lot of portfolio rebalancing to take place if the Silver market drops 10% in a day across many hedge funds." (SNIP) "It is obvious to anyone observing the Silver market that it is overheated to the Nth power. The longer CME ignores the problem, the worse the consequences will be down the line. When all the other risk-on commodity trades are putting in 1% days, and Silver is putting in 5% days, then you know the longer this goes on, the higher probability that this trade and market could end very badly." (SNIP) "The easiest way for the CME to lessen the probability of an epic crash in the Silver market, and the subsequent public and regulatory inquisitions, would be to raise margin requirements by at least 30%, as the starting point." http://www.businessinsider.com/silver-market-why-cme-must-raise-margin-requirements-by-30-2011-5
Margins have been too low for too long. They always tend to lag the market. The dollar value of silver's recent daily range has been greater than the outright margin level. :eek: :eek: :eek:
Volatility is silver has spiked up, daily swings are huge, so it was only prudent to raise the margin requirement.