How are maintenance margins applied?

Discussion in 'Trading' started by Grantx, Oct 2, 2017.

  1. shatteredx

    shatteredx

    #21     Oct 3, 2017
  2. comagnum

    comagnum

    Whoever has the $ makes the rules. Overnight brought up a good point - brokers have the right to liquidate your positions as your losses mount, even if have not hit the maint margin level. That was in all that fine print we sign off on opening the acct. You want to have enough cash in your acct so as not to trigger an auto liquidation. I have seen spikes in the overnight market that rocketed contracts up or down as much as $7K . Brokers will not be left holding the bag.
     
    Last edited: Oct 3, 2017
    #22     Oct 3, 2017
  3. Right. This confused me a lot when I started trading futures. My line of thinking was: I already have one contract, for which I need to have the maintenance margin. I buy an extra contract, for which I need the initial margin. I didn't understand why they would now see the whole position (being two contracts) as a new position and therefore require the initial margin for both contracts. But that is how it is: on the day you increase your position size you have to have the initial margin for the entire position. This is not IB-specific though, this applies to trading futures generally.
     
    #23     Oct 3, 2017
  4. Grantx

    Grantx

    Wouldn't your maintenance be $4500 for the two positions ($2,250*2)?
    If you are flat at the end of day two with 2 CL positions open then that would leave you with $5,500 in your account?
     
    #24     Oct 4, 2017
  5. Overnight

    Overnight


    If by "flat" you mean the position hadn't moved and was sitting at the entry price, then yes, you'd have $5,500, if you are required to have only $2,250 per contract.

    The reason I brought up the initial as being in my mind is what I consider "maintenance", to maintain the position, is because on my broker statement it would look like this, using IB's numbers and your question...

    Cash=+$10,000
    Initial margin=-$5,624
    Maintenance margin=-$4,500
    Open equity=$0
    Net liquidating value=+$4,376

    Or if the position was down $2000 as I mentioned above, it would be

    Cash=+$10,000
    Initial margin=-$5,624
    Maintenance margin=-$4,500
    Open equity=-$2,000
    Net liquidating value=+$2,376

    They list both margin numbers, but deduct the initial from the account balance, not the maintenance. Therefore I always use that figure in discussions, to be on the conservative side of things. I don't know what other brokers do, but it would make sense if they did. You must ask them specifically to see how they indeed do it.
     
    #25     Oct 4, 2017
    Grantx likes this.
  6. Your right about fine print.. but in my experience IB is quick and other brokers give you a day
     
    #26     Oct 4, 2017