Emini futures initial margins
Brokerage firms require a minimum amount of funds in an account, or minimum margin, for traders to be able to use margin. The minimum margin requirements for futures contracts, known as performance bonds, are set by the exchanges that offer these contracts. These minimums change frequently in response to market activity. The minimum margin requirements change in response to events such as:
- Changing volatility
- Shifts in supply and demand
- Changes in fiscal policy
- Major geopolitical events
- Natural disasters
Initial margin is the margin that traders must pay for with their own money when initiating a position. Also known as futures requirement, these rates vary by contract, contract date and brokerage firm. Initial margin is a percentage of the full contract value of a position and is used to ensure that traders have enough cash in their accounts to cover losses.
is the minimum value that must be maintained in a margin account. As an example, imagine that a trader entered a position to buy (go long) the September 2012 ES when the contract was trading at 1355.00 points. Imagine also that the exchange (CME) required an initial margin of $4, 500 to trade the contract, with a maintenance margin of $3, 500. If price fluctuations in the ES bring the account balance under $3, 500 (the maintenance margin amount) the trader would have to deposit additional funds to bring the account value back to the required initial margin. The potential gains and losses of the position fluctuate every time the settlement price of the contract changes. The final gain or loss is determined when the position is closed or when the contract expires.
A margin call occurs if the account falls below the maintenance margin amount. A margin call is a demand from the brokerage firm that money be added to a trading account to meet the initial margin requirements. If the demand is not met, the brokerage firm can close out any open positions in order to bring the account back up to the minimum value. The brokerage firm can close the position(s) without notifying the client in advance. Even if the brokerage firm offers the trader time to increase the equity in the account, it can sell off positions without consulting the trader. Traders may be able to avoid a margin call by closing out the losing position(s). Important terminology regarding margin are shown in Figure 3.
Figure 3 - Various margin terms.
Pattern Day Traders
Although futures traders are not subject to FINRA's Pattern Day Trading rule (which requires a minimum account size of $25, 000), day traders may have different margin requirements than traditional overnight traders. If a broker-dealer identifies a client as a "pattern day trader" (anyone who executes four or more day trades within five business days), the broker-dealer may enforce special margin requirements on the client's day trading account(s).
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ES Emini Trading: How does a Futures Margin Account Work
When you establish a futures account with a brokerage that specializes in futures trading, you will be asked to deposit a sum of money to cover your margin and commission expenses. The actual size required to establish a futures account varies from brokerage to brokerage, with some firms requiring as little as $3500 and others requiring $10,000 or more. The opening balances are at the discretion of actual futures brokerage.
Emini Trading - Margin in Emini Futures.
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