Are ES Futures Options also settled daily?

B

beefcaketrade

I know futures contracts are settled daily to debit or credit the account according to the last closing mark of the day prior.

But what about futures options? Are they also settled daily in terms of debit/credit to your account? Or are they like normal equity options where the debit/credit only occurs during the initial opening trade (and finally during closing trade)?
 
Futures and options on futures have a settlement price and your net liquidating equity is based on that value. The difference between today and yesterday is your p/l for the day. Some of that will be realized and some unrealized p/l.
 
Thanks.

I know futures are settled daily with realized p/l daily in the practical sense.

Are options on futures also settled daily then with realized p/l daily?

I'm wondering if there is a cost of carry for short option positions (credit) that say move against you, and hence technically in the red, whether that leads to a debit from your account when mark to market during daily settlement.
 
beefcaketrade said:
Are options on futures also settled daily then with realized p/l daily?

I'm wondering if there is a cost of carry for short option positions (credit) that say move against you, and hence technically in the red, whether that leads to a debit from your account when mark to market during daily settlement.
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Your net liquidating equity is what is important. It is based on settlement prices for ALL positions. I don't know what you mean by "cost of carry." In a securities margin account, you can have a borrowing cost if your long positions are more than your equity. Futures accounts don't do that, unless you are a hedger. You must have the equity in your account to cover the INITIAL MARGIN REQUIREMENT and then the MAINTENANCE MARGIN REQUIREMENT, or you will have to add funds. If the marks cause your liquidating equity, or whatever your FCM calls that, to drop below the MMR, you get a margin call. If that drops below $0.00, you owe them money after you are liquidated.

Does that answer your question? Give me a call one day if it does not.
 
Robert Morse said:
...You must have the equity in your account to cover the INITIAL MARGIN REQUIREMENT and then the MAINTENANCE MARGIN REQUIREMENT, or you will have to add funds. If the marks cause your liquidating equity, or whatever your FCM calls that, to drop below the MMR, you get a margin call...
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So on GC, if the initial was $6.6K per contract, you'd need $6,600 (Initial) plus $6,000 (Maintenence) total = $12,600 to hold one contract? I am speaking of a future here, not an option. I have gotten so many different answers to this question I do not know who to believe. It seems that nobody really knows the true answer. Sad work ethic, really, on their parts.

Please explain further on how you handle it at your firm, Lightspeed.
 
GC Initial margin is $5940. Maintenance is $5400. You need $5940/contract in your account to buy/sell each future. If you lose money, and your account drops where you have less than $5400 in collateral for each contract, you must reduce your position or add funds to get back up to the Initial margin level of $5940. A FCM can be more restrictive over-night, but not less. For day-trading, they can offer more leverage. EG, we can offer up to 25% of SPAN margin for day -trading, on a case by case basis. That ,mean you can buy up to 4 futures for each $5940 in your account, but must reduce by the end of the trading session. We introduce to Wedbush Futures.

https://www.lightspeed.com/futures/

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These are SPAN margin rules set by the CME.

Does that help?

Bob
 
Robert Morse said:
GC Initial margin is $5940. Maintenance is $5400. You need $5940/contract in your account to buy/sell each future. If you lose money, and your account drops where you have less than $5400 in collateral for each contract, you must reduce your position or add funds to get back up to the Initial margin level of $5940...

Does that help?

Bob
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No. If Init is $5940 per contract, then why is maintenance even coming up in the conversation, which is less? Would it not be more prudent to simply assume Init is the required amount, to not have to worry about "maintenance"?

Your post spoke of INITIAL MARGIN and then MAINTENENCE MARGIN, as if they were additive.
 
So here is how the sentence should read, yes?

You must have the equity in your account to cover the INITIAL MARGIN REQUIREMENT, or you will have to add funds. If the marks cause your liquidating equity, or whatever your FCM calls that, to drop below the IMR, you get a margin call...
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Am I wrong here?
 
Overnight said:
No. If Init is $5940 per contract, then why is maintenance even coming up in the conversation, which is less? Would it not be more prudent to simply assume Init is the required amount, to not have to worry about "maintenance"?

Your post spoke of INITIAL MARGIN and then MAINTENENCE MARGIN, as if they were additive.
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You asked me to help, then told me I'm wrong. Maybe this can explain it better. I NEVER said to add them together.

http://www.cmegroup.com/clearing/risk-management/performance-bonds-margins.html

Initial Margin Requirements
There two different kinds of margin that a market participant should be aware of. Initial margin is the up-front payment, a percentage of the trade price, made prior to a market transaction when purchasing on that margin. After the initial margin is met, a market participant is required to keep up maintenance margin. This is the amount of equity required to retain an open position.
 
Robert Morse said:
You asked me to help, then told me I'm wrong. Maybe this can explain it better. I NEVER said to add them together...
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No no, I never typed that you were wrong. I think that what you typed earlier was confusing, in that one must consider initial AND maintenance. Since Initial is higher than maintenance, then would it not be prudent for everyone to consider the initial to be the maintenance amount, just to give them extra "space"?

I realize the exchange has it's rules, but I don't understand why the initial and maintenance are not the same darn thing if they are not additive.
 
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