Futures emini S&P

Hi to all.

I've been investigating and studying about day trading in emini futures.

I do not understand what would be the worst scenario. I understand that I do not need the money of a full contract. Margin to enter is about 5000.

The worst scenario would to loose 5000. Or to loose 5000 + value of 1 contract that in this case could be about 60000.

I do not feel confortable with the 60000 loose possibility. So, what other possibilities can I have in day trading besides stocks?

Thanks very much.
Joaquin

 

If you have a $5,000 account and your position size falls by $5,000 (which would be 100 points on a single ES contract) your account would be worth $0 and it would be closed.

This would probably happen somewhere closer to $2,000 as your brokerage probably won't let you have any open ES contracts with less than $2,000 in your account.

 

Ok, are you saying that is not a way I can lose more than the margin that is requested to open the account?

For example, I open the account with 5000. Something happened, does not matter if it is unrealistic or not to lose 100 points in one day. Hopefully the stop loss will avoid that. But let's suppose that I lose 100 points in one day.

Then, my account will be closed and my losses wil be 5000 , not the entire value of 1 contract.

Correct?

Thanks.
Joaquin

 

right, In the old days they use to have something called a margin call, when the broker would call you and tell you you owed more margin money, and sometimes the account would be at a deficit.

But now it is all electronic and you get closed out, like you say with 5k at about 2k. So with 5 you can lose 3, but with 10k you could lose 8k, and so on.

 

When you trade the S&P Emini, usually the broker will auto liquidate you at a specific percentage of your account value. For example, AMP will auto liquidate at 80%.

However, there is a difference between the amounts required to open a contract and to hold a contract beyond one session.

 

that's the first I've heard of 80% auto liquidation, but I know some firms advertise day rates. But at interactive you won't get liquidated unless you fall below maintenence or overnight if you hold overnight.

But generally, responsible traders don't rely on auto liquidation to prevent loss.

But in all fairness, the OP was just learning and asking worse case scenario.

So far, nobody has mentioned solar flare, or massive power outage, and then you might get a phone call (if you still have a dial up) stating you owe 20k.

 

You can absolutely lose much more than the $5k. The CBOT ags had a few consecutive limit up days in 2012. Kerviel/MLK could have taken you out had you been close to maint. req. on ES.

Overnight risk? A dirty nuke would be good for a 30% drop if you're holding a one lot with $5k and you're out $15k more.

None of you have witnessed a gap? 9/11?

 

To hold the contract more than one session do you mean that when you buy an hold the position until next day? If so, I plan to close my position in the day.

Yes I have read about margin call and for that reason I was a concern if I can finish with a debt of 60000 of so in the worst scenario.

Any advise on which online broker should I choose? I do not plan to start now, but I want to start investigating this.

Thanks
Joaquin.

 

hey joaaquinn, you're doing the right thing, asking the right questions. There's a lot of good info on the CME site, and that is from the horse's mouth. The things you get here are open to interpretation. But you are doing it right.

as far as an online broker, that's a whole nuther matter.

it sounds like you want to risk 5k, and most will tell you it is extremely difiicult to trade e minis with 5k

but then again, it is extremely difiicult to trade, period, regardless of how much you start with.

If I was starting over again today with just 5k, I would venture into forex. The positions over there are more suitable to small (and that's what I call anything less than 1m) traders.

good luck, I like it when people ask first and trade later

 

The risk of going debit is very low. If you're paranoid then I suggest sticking to SPY calls and puts. Penny markets and you can't go debit and the vol-risk will be reasonable intraday. Stick to the 30-60 day options. A two lot ATM is roughly equivalent to 100 shares SPY.

The July 132C went out at 3.30 mid today. An *ATM* ten lot is roughly = one lot ES futures-delta. $3,340 debit with commission. You're inherently long vol in an outright long call or put, so somewhat protected from a blow-up of the debit paid.