OK, but I guess I'm missing the practicality of it. Say I bought a couple of CL contracts and forgot I did it. Went on vacation. All moved it the wrong direction. I come home from vacation and I owe them my house? Is that even possible?
Day Trading Futures Margins
- Thread starter Money Trust
- Start date
Whew...
I figured that but it's weird to have to acknowledge this sentence in an application. Honestly I've never seen it before I filled out an application for a new account in NinjaTrader Brokerage today.
I figured that but it's weird to have to acknowledge this sentence in an application. Honestly I've never seen it before I filled out an application for a new account in NinjaTrader Brokerage today.
No offense, but if you don't understand, this you shoudn't be trading futures.
AAAIntheBeltway,
My response to: "No offense, but if you don't understand, this you shoudn't be trading futures."
Of course I understand that the broker is going to close your positions before you get anywhere near this possibility, but imagine a hypothetical that the broker screws up, for whatever reason, and your position is not closed properly. Who is responsible then?
I've just indicated in a signed application that "I understand that I may be responsible for more than my total account value." This is obviously completely unlikely but then stranger things have happened.
It's a bit more than a rhetorical question for me. Why would they ask me if I understand that something might happen if it can't happen? Obviously, they think it might happen, or they wouldn't bother to tell me that it could.
My response to: "No offense, but if you don't understand, this you shoudn't be trading futures."
Of course I understand that the broker is going to close your positions before you get anywhere near this possibility, but imagine a hypothetical that the broker screws up, for whatever reason, and your position is not closed properly. Who is responsible then?
I've just indicated in a signed application that "I understand that I may be responsible for more than my total account value." This is obviously completely unlikely but then stranger things have happened.
It's a bit more than a rhetorical question for me. Why would they ask me if I understand that something might happen if it can't happen? Obviously, they think it might happen, or they wouldn't bother to tell me that it could.
OK, now it's interesting:
AAA is (I think) implying I'm naive for even considering the possibility and rmorse is clearly saying I should be concerned (enough to form an LLC to protect against the possibility).
I'm looking forward to hearing more responses... thanks everyone.
AAA is (I think) implying I'm naive for even considering the possibility and rmorse is clearly saying I should be concerned (enough to form an LLC to protect against the possibility).
I'm looking forward to hearing more responses... thanks everyone.
rmorse
Sponsor
There are other considerations before forming an LLC beyond higher MD fees. You should talk to a tax expert. My point is that you need to view trading as your responsibility to monitor risk. The FCM will have a policy to protect them not you. If you are concerned about excess risk, like naked option selling or the leverage from FX trading, you should consider an LLC. I moved my market making business from a sole prop to an LLC once I found out that my Prime Broker accepted that. Before my LLC, I was required to sign a personal guarantee.
rmorse, thanks...
I'm not very worried about my own decisions. I trade 1 or 2 equity contracts at a time (usually TF -- always risking less than 5% of my account) and never hold overnight. I've had futures accounts for years at many brokers and have never been told that I could be responsible for more than the money I've already given them. That's a very strange concept to me. It sounds like the broker is passing what should be their responsibility to me and I guess you're saying that that is exactly what is happening.
I'm not very worried about my own decisions. I trade 1 or 2 equity contracts at a time (usually TF -- always risking less than 5% of my account) and never hold overnight. I've had futures accounts for years at many brokers and have never been told that I could be responsible for more than the money I've already given them. That's a very strange concept to me. It sounds like the broker is passing what should be their responsibility to me and I guess you're saying that that is exactly what is happening.
rmorse
Sponsor
I've never opened an account where there was not a statement like this:
(1) You may sustain a total loss of the funds that you deposit with your broker to establish or maintain a position in the commodity futures market, and you may incur losses beyond these amounts. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position. If you do not provide the required funds within the time required by your broker, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account.
If you are managing your risk and doing mostly day trading, it sounds like you have it covered. I would not bother with an entity with your description unless there were other reasons.
(1) You may sustain a total loss of the funds that you deposit with your broker to establish or maintain a position in the commodity futures market, and you may incur losses beyond these amounts. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position. If you do not provide the required funds within the time required by your broker, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account.
If you are managing your risk and doing mostly day trading, it sounds like you have it covered. I would not bother with an entity with your description unless there were other reasons.