How to allocate PnL for futures margin?

Discussion in 'Automated Trading' started by Raul641, Apr 14, 2008.

  1. Raul641



    I'm working on a backtester now. I'm trying to make it work as closely as possible to how real orders fill. After much research, I can't find a clear explanation of precisely how to handle margining and PnL for futures contracts.

    For example:

    - Contract X has intraday initial margin of 2k, maintenance margin of 1k. Each whole number point is worth $100.
    - Account starts with 100k USD cash.
    - System buys 10 contracts of X at 100.00
    - Take 20k from cash, move 20k to margin account. Add +10 X contracts.

    Now.. here's where I am losing it. Suppose price drops to 99.00 and I mark-to-market. I subtract 1k from the margin account -> cash 80k, margin 19k.

    Then the system sells 2 of the 10 contracts. How much do I move back from the margin account to cash to reflect the sale?

    My ideas:
    - $2k each (the initial margin per contract) -> $16k
    - $1k each (the maintenance margin per contract) -> $18k
    - a pro rata division of the aggregate loss for all 10 contracts so far: (1k / 10) * 2 contracts, or $200 -> $19,800

    Can someone please tell me how this is actually done, and whether the other stuff I've written is correct?

    Many thanks,
  2. Raul641