Question about maintenance margin trading ES confused.

Discussion in 'Risk Management' started by ER9, Feb 3, 2009.

  1. ER9


    i trade ES and have recently developed a strategy that outperforms my old one. it does however require me to hold positions over night and trade with much wider stops. basically its longer term swing trading.

    iv'e never had to deal with the potential of a margin call because my other strategy uses fairly tight stops. as a result i have never taken the time to thoroughly understand margin. the time has come though.

    To trade the E-mini S&P 500, currently the overnight requirement is $6188 per contract if i'm understanding it so far....and the overnight maintenance is $4950.

    Does this mean that if price goes against me approximately 25 points ($1238.00) that i would incur my first margin call? And if so how much would i have to come up with, approximately to satisfy my defecit? $1238.00 per contract?

    By the way my broker is IB if it makes a diffrence from broker to broker.

    Thanks ER
  2. You've got it, but you won't have a chance to put more money in. IB automatically liquidates.
  3. ER9


    ok so to effectively trade without getting that margin call at 25 points i need to have in my account +$1238.00 in excess cash for every ES contract i'm trading? by excess i mean $1238.00 above $6188.00.

    also do the same rules apply for long and short positions?
  4. 1) ?....No. It would be $1250,($50/handle times 25 handles), over $4950,(the maintenance level), giving $6200, ($1250+$4950), budgeted margin per contract in order to withstand a 25-handle drawdown per contract.
    2) The same logic applies to long and short positions.
    3) 25 handles is too much leeway. Consider using a tighter "stop".
    4) If you ever receive a margin call, don't pay it. It means you are "badly wrong". :cool:
  5. If I were you I would not trade with only the exchange initial margin in my account (the $6200 or whatever it is).

    What should be clear is that one losing trade, regardless of how much you lose, results in the inability to make another overnight trade.

  6. bighog

    bighog Guest

    A word of caution trading overnights.

    Regardless of how much you have in account per car for overnight ( 10k should be a minimum ) you are in very deep waters when some clown hits the STOP SERVER with a fat finger error, etc, etc. Your so called life raft will lose air real fast and ...........Good Luck getting the exchange to break the trades.

    The exchange does not like to BUST trades because that is saying the system is not fail safe. ha ha ha ha ha.

    I would never hold a position overnight unhedged. NEVER

    A STOP LOSS order is not a hedge. My hedge is daytrade exclusively. Sleep and sweet dreams prevents burnout. :)
  7. If your account falls BELOW maintenance margin, you'll receive a call to bring it back up to initial.

    Someone said IB will liquidate the position rather than call you. MF Global calls. Then again, they know my name & who I am & what I trade.

    Traders pay IB peanuts for commissions so why should they give a crap about you?

    I'm comfy holding SHORT ES positions overnight. I never take home a long ES Position or over the weekend b/c too much could happen to knock the market down.

    Don't lose big money. I'm happy you found a "system" that works, thought I Naturally have reservations about all these "back testing" systems.

    GOod luck.
  8. You just need to have enough for the liquidation value of your account to not go below the maintenance margin requirement. You'll have to figure out how many points you are willing to let it go. ES does lock limit after 5%, which they set every quarter I think, it was ~60 points the only time it's locked limit over night, but the limit is less now. I guess that would be the absolute most it could go against you overnight, the lock limit.

    If you're trading with a small amount of money, you could just use SPY/SH and not have to short or use futures at all.
  9. ER9


    thanks nazzdack....dont know how i missed that one. think i was on information overload at the time. i appreciate the clarrification.
  10. ER9


    i completely agree. i'm just trying to establish the numbers in my brain so i'm prepeared and know exactly where i stand and where i need to be regarding how many contracts i can safely trade overnight, or swing longterm.
    #10     Feb 4, 2009