Futures margin?

[dmcw]

I'd say you've got the concept right. With one addition... Initial margin is the requirement at the moment the opening futures position is filled. Once filled, it is the MAINTENANCE MARGIN that, in your words, becomes frozen. Also understand, handling of drawdown situations BELOW MAINTENANCE MARGIN is dependant on your broker.

Quote from TraderStavros:

Ok, I didn't even want to discuss maintenance margin since I intend to have my stop loss FAR above $900/contract! It is extremely important though so I have a follow up question. Let's say my account value is $4500 exactly for illustrative purposes.

I purchase one contract. I now have $900 'unfrozen' for trading? Let's assume a mixed account where I can buy stocks so that $900 would be able to be used. If I spend that $900 and the value of that stock falls below $900 will I receive a maintenance call? (in general)

I think when I finally begin trading I will just book the whole $4500 as tied up until I exit the trade. I don't intend to hold on very long any way and maximizing every penny in my account does not interest me so I don't think I'll run the risk of trading away the amount needed to satisfy the maintenance margin.

I appreciate your (collective) input and hope not to be such a newbie soon!

This is incorrect. It's not that you need initial margin at the 'moment you purchase the contract', then the margin falls to maintenance level. At the moment you purchase the futures contract you only need to have the day margin that your broker requires. You need to have the Initial Margin ($4,500 for ES) when the market closes the first day you establish the position. 'initial Margin' and 'Overnight Margin' are often used interchangeably. If you meet the initial Margin that first day, your position then only requires Maintenance Margin ($3,600) to hang onto. However that doesn't really 'free up' $900 to use for new positions. It doesn't become 'margin excess'. It just gives you some leeway for that position to go against you before you have to liquidate or send more funds. If your equity falls below the $3,600 Maintenance Margin, you'll then be called upon to deposit funds to bring the equity back over the Initial Margin of $4,500. I think that covers it. Feel free to contact me directly if I can answer any more questions.

Best regards,

 

[osorico]

Quote from dmcw:

This is incorrect. It's not that you need initial margin at the 'moment you purchase the contract', then the margin falls to maintenance level. At the moment you purchase the futures contract you only need to have the day margin that your broker requires. You need to have the Initial Margin ($4,500 for ES) when the market closes the first day you establish the position. 'initial Margin' and 'Overnight Margin' are often used interchangeably. If you meet the initial Margin that first day, your position then only requires Maintenance Margin ($3,600) to hang onto. However that doesn't really 'free up' $900 to use for new positions. It doesn't become 'margin excess'. It just gives you some leeway for that position to go against you before you have to liquidate or send more funds. If your equity falls below the $3,600 Maintenance Margin, you'll then be called upon to deposit funds to bring the equity back over the Initial Margin of $4,500. I think that covers it. Feel free to contact me directly if I can answer any more questions.

Best regards,

Thank you for the correction.

Osorico