For me it is irresponsible to give these $500 or less margins to clients. I trade already for over 2 decades and will never go lower than $1,000 per contract ES. The drawdown of the losses can be too massive.
Basic ES question
- Thread starter xlr8
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For me it is irresponsible to give these $500 or less margins to clients. I trade already for over 2 decades and will never go lower than $1,000 per contract ES. The drawdown of the losses can be too massive.
I asked the CME about this issue last year.
Here is the breakdown of what the guy said...
(Current maintenance of the ES)...$4,600
Source...
http://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_performance_bonds.html
The CME guy told me that no matter who you are...A clearing firm, non-clearing FCM etc, you must put up initial $4,600 to hold 1 contract in the ES at your firm, if your client is a "hedger" client. But as a speculator/non-hedge, you are subject to the 10%-per-contract-extra rule. So the Initial is actually $4,600 + $460 = $5,060. If they allow you the $300, the broker is on the hook for $4,760 in this case.
If your broker allows you to need only $300 equity in your account, then that means that they use $300 of your capital, and $4,300 of their own funds, to allow you to hold the position during the day. ($4,760 if a speculator/non-hedger) They are fronting you most of the money so you may trade that 1 position during they day.
If you decide to hold the position past the market close, the broker will most likely no longer cover your position for you. You will lose that loan they gave you so you could trade. This means that at 5PM ET it is now YOU that is on the hook for the $5,060 from your own capital account. The free ride is over at 5 PM. If you do not have the $5,060 + the worth of your open position at ETH close, they may liquidate you.
Each broker is different in how they handle this, and as we have seen, some brokers are more restrictive than others when it comes to allowing their clients to enter positions with smaller amounts of capital.
Bottom line...CALL YOUR BROKER TO GET THE SPECIFICS!
You cannot get an accurate answer here that covers everything you may encounter with your own broker. Call THEM, not EliteTrader. Unless you are trading with LightSpeed or Optimum...Those guys post here lots.
Or..... they keep the client trade off-exchange and take an extra 1/2 point on the spread they give the client and hedge themselves on-exchange... that way they don't have to follow margin rules nor exchange rules for the client... and they get extra from the spread. And they can force the client out earlier at again a good spread for themselves when the client dips below the 300 bucks...
That might be problematic for them. I have realtime datafeed and 1/2 point ES will be noticed immediatelly. And then I will make them a lot of problems as I never authorized them to do that. I became client to trade the ES market and not any other "alternative".
L
lovethetrade
Great post and very informative. A post like this deserves about 20 likes when you consider some of the posts on here that gain popularity.
I'm sure this will clear up a lot of confusion regarding this subject also because it tends to pop it's head up every now and then.
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I have to apologize and post a correction about it. The bits where I said "non-pro" and "non-hedge" is not correct. I had a total brain freeze on that, and meant to say non-member of the exchange. The extra 10% has nothing to do with hedging or pro status. No idea why I got wires crossed about that when typing it. Hope that clears up any confusion.
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I think that is right.
As always, double check with your broker. I remember a silver chart , with price going up to $50+ margin going up right along with it. [Nice margin+ price uptrend LOL ]But it made a lot of sense ;@$50 silver, one contract was worth $250,000, if if remember right = worth more than many people's house
It paid off a few houses also.
Haha Agreed. Emini futures are no joke. I just got started, but I have traded options for the past couple months so I am starting to get comfortable with the volatility. But If you are planning on depositing enough for 1 contract, and you are new to trading, with a 1 point stop lool.... No shot bro. Im working with an account that satisfies PDT and I only trade 1 /es contract at a time and still some big movements get me sweating. 1 es contract is a lot of leverage. It can move against you 2-5 points in a split second. Better off trading options 1-2 contracts at a time in a cash account if u don't got the balls to set atleast a 5 point stop on 1 contract.New to trading and a 1 point stop???You will get quickly to that margin call as you will be stopped out many times. Unless you have a magical system to take perfect entries.
Many brokers will not give you lower prices than 25% of initial margin until you can proof you are able to master the risk in a appropriate way. So you will need minimum around 1250-1300$ per contract. The $400 margin is only given by brokers that desperately need clients.
5 point stop for Day Trading ES seems excessive, at that point you are just hoping that price comes back to your entry or beyond. Maybe for swing trading off of big s/r levels.