this is one of the main reasons I am staying away from futures right now...this is the ONLY trading vehicle where you can lose more than is in your account...in Forex...the broker would simply liquidate and your account would be at zero...from my information
Can you lose more than the Initial Margin?
- Thread starter Wolfgang1756
- Start date
I would think forex to be the most dangerous of all markets save penny stocks or illiquid issues.
I think futures are...forex brokers automatically liquidate you if you get too low...not with futures...from my understanding
Quote from Wolfgang1756:
I am thinking of trading Futures, more specifically the ES - Mini S&P 500 and I have a question.
The Initial Margin for this contract is $5625. Now suppose I have $7000 in my account I buy one contract at 1100.
Overnight something terrible happens and the S&P 500 opens at 800 and never goes about 800 the whole day. So I have lost 300 points at $50 each = $15,000.
So what is my liability? Is it just the margin of $5625? Or the actual amount of $15,000? I assume that my position would be immeadately liquidated at the open, correct?
If I am liable for the full $15,000 and my account only has $7,000, what happens to the rest of the $8,000? If had some other stocks worth say another $2000, could they sell those too? Can they sue me for the rest???
Pretty much the answer to all of your questions about whether the worst could happen is YES.
And I believe that heavy debt from trading cannot be bankrupted away, but that is something based on reading a few years ago.
okay...now that all has been shared...what will you do?...trade futures or not trade futures?
index futures aren´t that dangerous, compared to commodities
they have circuit breakers and limit down even in pre/market. Moves of over 1000 DOW points and 100 S_P points don´t happen, not even with 9-11
only in case of like UFO´s suddenly landing, or dollar going from 1.50 to like 6
yes you can lose more than you have in your account, thats why you trade only intraday, and only with stops, and only with the brokers phone number next to your desk.
preferably you have $5000 in a second brokerage account you can use for hedging in a most extreme scenario.
they have circuit breakers and limit down even in pre/market. Moves of over 1000 DOW points and 100 S_P points don´t happen, not even with 9-11
only in case of like UFO´s suddenly landing, or dollar going from 1.50 to like 6
yes you can lose more than you have in your account, thats why you trade only intraday, and only with stops, and only with the brokers phone number next to your desk.
preferably you have $5000 in a second brokerage account you can use for hedging in a most extreme scenario.
Now I understand your user ID. Limit down & limit up is basically not limiting your loss. It basically means that there is no one on the other side of your trade at the max extent allowed in the trading session. There is no guarantee you will get out with an acceptable loss.
After 9/11, they closed the markets for a few days. Do you think people were getting out with a 5 point ES loss???
I don't understand why people always call futures inherently dangerous. Don't you guys know that you can protect yourself against a catastrophic event with far out of the money options? Nassim Taleb has a fund that does nothing else but bet on that event....
Is like buying health insurance....you pay a premium to protect yourself against the cost of a catastrophic illness.