Futures Margin call

Quote from greggg:

Is it possible to owe more than the cash value of your account?

If so, could someone please proved a scenario.

I know you can pay the amount of the margin call to have your account released from call status. Or, you can liquidate your positions.

If you choose to liquidate your positions what happens to the account. Can you keep trading? Do they come after you for the amount of the margin? I've never seen these questions answered in plain English. :->
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Of course it's possible.
If you are using leverage it is possible to owe more than your account.

Let's suppose oil, 1000 barrels of oil at say $115, that's $115,000 worth of oil.

If you are only using the $11k margin; if oil moves $11 against you, so fast they can't liquidate your positions, you'll end up losing 100% and even owing money.
 
Yes!!!! you can owe more and they will come after you.

If your broker supports trading sub accounts and you need to buy time you may be able to do the following:

Example: $5K account.
Intraday margin: $300

Short 5 ES 1290 near end of session... market at 1295.
You are down -$1250 using $1500 margin.

Option 1:
Overnight margin $22,500 >>> you don't have it.

Option 2: Take the loss and liquidate.

Option 3: Open a second opposite position in a subaccount and go Long 5 at 1295.

You need $1500 intraday margin for each position. $3000.

Your net contracts at session close for overnight SPAN Margin calculations is Zero. No Margin Call

You have hedged your losing position and bought another day to close out your trades.

If the spread is greater than your account balance you will get a Margin call but at least you stopped the bleeding and are protected from owing more than the spread + trading costs.

Good Luck.
 
The dangers of holding into a midnight wipeout (or weekend wipeout as with this guy http://www.youtube.com/watch?v=Mk3hmifWLhE) are two reasons why my systems and broker agreement will not allow me to:

1) hold overnight,
2) owe more than my account balance at any time, and
3) build such a balance that would be emotional to lose in such a case, guaranteed by:
a. Written agreement with the broker to liquidate my position should the margin ever come within $100 of my balance, and
b. Automatic distributions to my bank account by wire anytime the balance exceeds my pre-defined limit, an amount that happens to coincide with the maximum number of cars I can reasonably expect fills on with limited slippage.

I never hold overnight. I like to sleep well.
 
http://www.sec.gov/rules/sro/34-46555.htm

Customer Margin Requirements

515. General Requirements; Offsetting Positions; Exclusion for Market Makers


(i) Aggregation of Accounts and Positions. For purposes of determining margin requirements under this Rule 515, Clearing Members and, if applicable, Exchange Members shall aggregate accounts under identical ownership if such accounts fall within the same classifications of customer segregated, customer secured, special reserve account for the exclusive benefit of customers and non-segregated for margin purposes. Clearing Members and, if applicable, Exchange Members may compute margin requirements for identically owned concurrent long and short positions on a net basis.

http://www.nfa.futures.org/COMPLIANCE/publications/Margins/MarginsHandbook.pdf

Concurrent Long and Short Positions
Concurrent long and short positions are long and short positions traded on the same contract market in the same futures or options contract for the same delivery month or expiration date and, if applicable, having the same strike price.

A firm may carry concurrent long and short positions as follows (see CFTC Regulation 1.46):
• In domestic and foreign omnibus accounts. All positions held by domestic and foreign omnibus accounts shall be margined on a gross basis.

• In a hedge account in which both the long and short positions are bona fide hedge positions. Such positions shall be margined on a net basis at all exchanges.

• In an account or identically owned accounts in which one side is a bona fide hedge position and the other side is a speculative position. Such positions shall be margined on a net basis at all exchanges.

• In separate accounts for identically owned speculative concurrent long and short positions which are separately and independently controlled. Such positions shall be margined on a net basis at all exchanges.

• For positions margined on a net basis, no margin is required; however, the account must maintain a zero or credit net liquidating equity.

Concurrent Long and Short Hold-Open Positions
Hold-open positions are positions offset at the exchange that, for convenience and customer service purposes, have been held open on the FCM’s internal bookkeeping records. The firm’s internal bookkeeping records shall clearly indicate all hold-open positions.

As hold-open positions only remain open on the firm’s internal records and are not true exchange positions, no margin is required.
 
Quote from GermanTrader:


I never hold overnight. I like to sleep well. [/B]
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Not sure why you would sleep better taking an end of session closeout loss versus locking the spread to the next session?

ie.. if your long 10 ES contracts down 2 points near session close. - $1000 why close it out at a loss when it will cost you $50 to short 10 more ES contracts and lock a spread until the next session/morning.

Doesn't matter where the market goes overnight you wake up and your still the same $1050 in the hole with a chance to recover.

Seems like a gift of an interest free loan of $1.2M in futures contracts to me for $50 in trading costs.

Hell, if your spread is tight... write options... pocket the premium.. cover your options on swings and you've learned a new trick to recover virtually any losing positions ;)

Now don't get greedy and let this spread get bigger and bigger with more and more contracts... Use it wisely as a safety otherwise you will need lots of ambient to get through the night.
 
Quote from Michael.jstocks:

does pre-market trading in the globex count as 'overnight' trading? Like, is the margin higher trading the ES right now? (6.30am) than it is at 9.30 am?
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Anything outside RTH (Regular Trading Hours) is considered overnight, and requires overnight margin.

Schaefer
 
i know Open-ecry liquidate automaticly if you have a 80% daily loss.

Thats probably for the better, with 80% daily loss should you really be trading.

However when CME goes down thats the biggest ond only problem you really have to worry about.

Another 9-11 will do that so if youre a daytrader with small account the slight chance of terrorism could mean a blow-up.

If just the indexes go down its not a big problem because CME with trade another 15 min or so before shutting down also. And before that youre profit target or stop has already been hit because terrorism will quickly move the markets.
 
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