Hello, Is there some retail futures brokers offering reduced margins on futures pair trades( calendar spreads or intermarket )? Thanks.
I assume you mean spread trades, not pairs. ("Pair trade" generally refers to statistical arbitrage, "Spread Trade" generally refers to relative performance trades) Everyone should offer dramatically reduced margin on futures spreads. CBOT and CME post their schedules of margin breaks for intra-product, inter-product, and inter-exchange trades. Here's CBOT: http://www.cbot.com/cbot/pub/page/0,3181,1041,00.html Spread new crop/old crop soybeans, and the margin is a whopping $338. This is in comparison to $1000 for an outright soybean position.
Thanks a lot. To me, the difference was only a terminology problem between stocks and futures. Thanks for explaining, i get it now. I was watching TS and IB sites to find if there is a reduced margin and I didn't find it. Do you think I have to make a request? Do you get some reduced some reduced margin with your broker on ag futures?
The margin is set by the exchanges, in general, through SPAN. So, the margin charged to TS or IB by the exchange should be the same margin charged to you. In other words, I'd definitely ask, but IB just gives you the proper margin automatically. I do get substantially reduced margins on my spread trades. 90% of my trades are spread, and it makes a big difference, particularly in treasuries and Eurodollars. (An ED spread may only move $500 peak-to-peak, so you need to get quite a few contracts to make it worth your while)
I can confirm that our performance bond requirements on futures and futures option spreads are practically same as requirements of exchanges/clearing houses. The only difference is our minimum of $50 per position for futures. Exchanges publish this information on the Web.
Thanks again. In fact, I'm on TS. I was just watching IB website to see if there were different informations. On TS, on the daily futures margin requirements PDF, they say that SPAN margin "may" be applied and vary from exchange rates. I have sent them an email to know what it means. I've been trading an intercommodity spread for 8 months that is supposed to be at a discount from the outright positions,but i don't know if they are applying it.I never get the same margin on TS and my mailed reports... I have an other question. Do you have to send the 2 orders on the 2 legs at the exact same time to get a reduced margin applied? 'cause it's great to have a small maintenance margin but if you still have to get the cash at the time of the trade... Thanks.
1. SPAN is ALWAYS applied on IB. 2. We really cannot take a risk of one leg order is executed and the other is not. So, you should have enough to be able to leg in and out.
Ok thanks. I assume it 's the same for initial margin on TS. In fact, on say an intramarket spread, you have the full margin of 1 single leg for a little amount of time ( less than 1 s with my system )and then the global reduced margin until exit. Am I right?