ES Journal - 2021/2022

Overnight said:
I have no link that can describe it.

Here's how it goes.

Let's say you have 20K cash in your account. You have an open position in the ES that requires a 10K performance bond+10% on the initial. Let's call it 5 ES contracts, assuming a performance bond of 2K per contract. Your position is even at the moment. So your position is +/- 0, but you have a 10K PB requirement. Your account is debit by 10K.

You now have only 10K cash in your account, because of that Performance Bond debit.

The next day, the ES drops 100 points. That's -$5000. Now your performance bond is still the 10K, but the cash available in your account is only 5K, because your NLV, the value of your position +/- the performance bond, is now only 5K. So you now have only 5K available in cash.

Your performance bond is pulled from your cash account every afternoon when the CME closes for that one hour.

Now...I could sell my positions at the open for negative 5000 bux.

That leaves me with a cash balance of 15K.

I could then try to re-enter the same position, but I would be doing it with 5K less. So I enter same positions with 15K +10% instead of 20K. Now I have less wiggle room, because I have the same 10K performance bond, but now only 5K as a buffer in cash, instead of 10K.

If the market drops another 100 points, which is 5K, my cash balance and performance bond requirement equal each other, and I am most-likely margin called. The positions are closed, and I am left with a 10K loss in total.

I have 10K in cash left in the account. I cannot open a new position identical to the ones I had, because I lost that cash by being margin-called. It requires a 10K+% performance bond, but I have only 10K left in the account. I gots no extra 10 initial %.

And it doesn't have to be a margin call to get to that 10K loss. You can do it to yourself as well, by closing the positions, WHEN THEY DO NOT HAVE TO BE CLOSED.

I did that three times during my trading journey, and I promised myself I would not do it again. This latest drawdown has been hell, but by golly, I must stick with the plan. Gotta' keep on with good music and good vibes, man.

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A performance bond on a $20K account? I don`t have time to elaborate but will later... this whole thing does not make sense!
 
Spooz Top 2 said:
A performance bond on a $20K account? I don`t have time to elaborate but will later... this whole thing does not make sense!
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Thanks Spooz Top 2.

It is the worst description or 'splaining of how futures margins/performance bonds AND how futures P/L math works that I've ever seen or read.

And for those following along... the amount of "performance bond" (which is merely a 64000 USD term for the commonly used term "margin" when discussing futures) has no involvement on futures P/L trade math.
 
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Builder17 said:
I still don’t understand performance bonds … the examples you gave with 5 ES going down 100 points overnight would put you down 25k and I don’t see many brokers keeping the 20k account open during that. Unless that math was just off in the example. If you held that long for some swing trade did you at least add any near the bottom with your extra margin? January smoked a lot of people.
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Those numbers were just examples, not the true numbers. It was a mistake to try to use 5 ES as a rhetorical scenario and the 2K requirement per contract, because I started conflating ES with MES in my head and it all came out sideways. Anyways, if you want to learn about performance bonds and don't want to read people here try to explain it, then go to the source.

Watch the video on this page.

https://www.cmegroup.com/clearing/risk-management/performance-bonds-margins.html
 
Overnight said:
Those numbers were just examples, not the true numbers. It was a mistake to try to use 5 ES as a rhetorical scenario and the 2K requirement per contract, because I started conflating ES with MES in my head and it all came out sideways. Anyways, if you want to learn about performance bonds and don't want to read people here try to explain it, then go to the source.

Watch the video on this page.

https://www.cmegroup.com/clearing/risk-management/performance-bonds-margins.html
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Ok thanks, I guess I was confused with the terms and thought you had some deal where you could maintain positions for less than 12k/1 ES contract overnight. Obviously holding long through the last 3 months has been pretty hazardous regardless.
 
Builder17 said:
Ok thanks, I guess I was confused with the terms and thought you had some deal where you could maintain positions for less than 12k/1 ES contract overnight. Obviously holding long through the last 3 months has been pretty hazardous regardless.
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Hazardous? It's been bloody awful. Putin' on the Ritz all right. What a shitlicker that guy is, messing up the world's economy.
 
Overnight said:
Hazardous? It's been bloody awful. Putin' on the Ritz all right. What a shitlicker that guy is, messing up the world's economy.
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Correct me if i'm wrong, but i think this is about the 3rd time in the last few years you've mentioned being long from the top. Obviously everything has continued to climb back to ATH at some point or another (and that may very well happen again), but wouldnt using stops be helpful to you? even if you are just trying to swing trade futures with small positions relative to account size?
 
Builder17 said:
...but wouldnt using stops be helpful to you? even if you are just trying to swing trade futures with small positions relative to account size?
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Not based on how I perform using small stops in daytrading mode. I cannot seem to do well jumping in and out of markets all day long during these huge point-ranges we've been seeing. So I decided to just use the expiry as the stop. Unfortunately for me, the war happened. I knew I could handle the hike cycle, but the war has the ES suppressed an extra ~8% in my guesstimation.

And because of the war, we are now starting to see some yield curves invert. IIRC, that's not good for the indices in general.
 
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