Can I trade futures with borrowed money (trading on margin with margin)

garachen said:
You can borrow money to trade futures. It's called margin financing. It's reserved for large clients who have a long history and large account balance. It's meant to overcome specific margin issues not give more risk to already risky accounts.
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Okay, this is what I'm talking about. Could you point me to, say, a webpage on IB's site that explains min. acct. req.s, etc.
 
garachen said:
You can borrow money to trade futures. It's called margin financing. It's reserved for large clients who have a long history and large account balance. It's meant to overcome specific margin issues not give more risk to already risky accounts.
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If he was one of their large account clients with a long history...they would have already discussed such with him even if he wasn't interested.
 
B Johnson said:
Okay, this is what I'm talking about. Could you point me to, say, a webpage on IB's site that explains min. acct. req.s, etc.
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IB doesn't do it. I only know of 3-4 places that do. They are very large FCMs

It's relationship driven. Not formulaic.
An example would be $5M account and 3-4 year history (with them) with no major risk issues, paying $500k+/year in clearing fees then you could bring it up and start working through the approval process. They might lend you $20M but hold you to their VAR model limits.

This is really one of the last steps. It's almost easier to get an ISDA. Think of IB as step 1, monthly profitability as step 2 and margin financing as step 10. There are many thinks you need to do sequentially before getting there.
 
B Johnson said:
Hey guys, I haven't been able to find a clear-cut answer to this... I understand futures margin is different than margin that one uses to buy stocks. Maybe you can help clear this up...

I would like to borrow an amount of money equal to my account cash balance. Therefore, I have twice the buying power in the futures market. However, I do not want to day-trade. I understand that I can have 4x the buying power if I day-trade, but can I have additional buying power even when I'm not day-trading futures? Basically like a secured line of credit... or can I only use leverage one way (i.e. futures margin deposit)?

To sum it up: Can I use borrowed (directly from brokerage firm) funds as my initial margin requirements for overnight futures trading?
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It may be helpful to recall that a futures contract is not an asset like a stock, but rather is a contingent liability. As such, the margin required to open and hold a futures contract is generally referred to as a "performance bond" as it's intended to secure payment of the cash variation due the counterparty should you suffer an adverse price change.

While brokers are allowed to lend money to a client to finance the purchase of a stock (i.e., the margin requirement), I am aware of no exchange that allows brokers to lend the performance bond required on an exchange listed futures contract, regardless of the client's creditworthiness.

Finally, while a long option having a futures contract as its underlying is an asset (a short option would be another form of contingent liability), exchange rules generally require that option purchases be paid for in full as they are considered wasting assets. Some exchange margin rules, however, do effectively allow the market value of fully paid long options to offset the risk margin requirement associated with other options and futures contracts through the SPAN margin methodology.
 
IB-AN said:
It may be helpful to recall that a futures contract is not an asset like a stock, but rather is a contingent liability. As such, the margin required to open and hold a futures contract is generally referred to as a "performance bond" as it's intended to secure payment of the cash variation due the counterparty should you suffer an adverse price change.

While brokers are allowed to lend money to a client to finance the purchase of a stock (i.e., the margin requirement), I am aware of no exchange that allows brokers to lend the performance bond required on an exchange listed futures contract, regardless of the client's creditworthiness.

Finally, while a long option having a futures contract as its underlying is an asset (a short option would be another form of contingent liability), exchange rules generally require that option purchases be paid for in full as they are considered wasting assets. Some exchange margin rules, however, do effectively allow the market value of fully paid long options to offset the risk margin requirement associated with other options and futures contracts through the SPAN margin methodology.
More...

And I know of no large trading company that does not use margin financing for exchange listed futures.

How else could you hold large cross exchange positions that don't give any SPAN offset?
 
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