Reasonable Equity to Margin Ratio for EMini S&P Program

Discussion in 'Index Futures' started by newtofutures, Aug 20, 2008.

  1. Hi,
    I have what might be a naive question but I have been testing out a trading system that is day trading the EMini S&P. I currently have $50k in the account and trading 10 contracts consistently. My understanding is that my Equity to Margin ratio is therefore 8%. ($1257 X $50 X 10 Contracts) / ($50,000 investment in FCM account).

    Is this correct in figuring out my Equity to margin ratio?

    My second question is if we plan to market this program as a CTA, would this low of an equity to margin ratio be very worrisome/non starter for many retail/institutional investors even with an attractive track record? Any thoughts on this would be great.
  2. Are you sure your 8% calculation is correct?
  3. No, I am not certain at all and think I am doing my calculation wrong. The margin account for my FCM is $500 per contract but I am not sure if that factors into this. I gues I am just trying to figure out what my margin to equity is when trading 10 emini contracts bought in morning during day and sold in early afternoon (never held overnight) on an account funded with $50,000. thanks in advance.
  4. trendy


    Close enough. 1 Emini S&P is the equivalent of 500 shares of SPY. SPY closed today @$127.58. So, $127.58 x 500sh x 10 cars = $637,900. $50,000/$637,900 = Equity margin ratio of 7.84%
  5. Equity Margin Ratio (EMR) = Margin Equity Ratio (MER)?
  6. Thanks. So to apply this to a typical CTA disclosure document that lists the Average Margin as % of Equity, if my fund were just $50k and I was trading 10 contracts, I'd be at 7.8%?

    What surprises me is that I thought I was being relatively conservative but many of the CTA funds that trade Eminis have a much higher margin as a % of equity. So i guess I'd need to fund an account at $100k trading 10contracts a day to be at a more conservative 15% margin to equity?
  7. 1) The reciprocal of that number is "leverage". You may want to "dial it down" so as not to scare people away.
    2) When trading, you may want to use the overnight margin figure instead of the daytrade margin figure to calculate position sizing.
  8. So you think risking 1% of the capital per 1 point ES is conservative? And you're becoming a CTA? And your name is "newtofutures?" And you can't calculate a margin-to-equity ratio?

    You're obviously kidding, sorry I bothered.
  9. et2011et


    Can any one post the right calculation?
    What is the correct MER in above case?