futures questions

Chuck Krug

Chuck Krug

Hello everyone,

1)I'm a customer of Interactive Brokers and I wondered what happens when the price of a futures contract exceeds the intraday margin requirement. Does the contract get sold? Do you receive a margin call/ message. Does it affect your cash position?

2) does anyone have any experience in how the sell market stops are being executed in a rapidly declining market situation?
a lot under your stop or in the area of your stop?

Chuck
 
(1) Regarding margin calls-----------DON'T PAY THEM! It means you've let a small loss grow into being a big loss. Generally, you'll be telephoned and have 24 hours to meet the margin call. If you don't pay it, the "worst" open positions in your account will be offset to stop the bleeding in your account unless you tell your brokerage firm what to offset. Your account balance has to be restored to the initial margin level of your existing positions if you don't want anything swept off of your statement. (2) Regarding the execution of sell-stop orders in a rapidly declining market, expect to get filled far away from your stop-price. Expect to get filled at the worst possible price until a huge buy-order emerges to absorb all of the selling. But you knew that already,.......didn't you?
 
Quote from Chuck Krug:

Hello everyone,

1)I'm a customer of Interactive Brokers and I wondered what happens when the price of a futures contract exceeds the intraday margin requirement. Does the contract get sold? Do you receive a margin call/ message. Does it affect your cash position?

2) does anyone have any experience in how the sell market stops are being executed in a rapidly declining market situation?
a lot under your stop or in the area of your stop?

Chuck
More...

Enough of your position(s) will be liquidated immediately to bring you within the margin requirements. There is no margin call, but the liquidation will show on TWS. You can designate a 'liquidate last' position if you have multiple positions. 'Slippage' will depend on the instrument - expect more 'slippage' on volatile and less liquid instruments.
 
I've been swing trading options for a while now and I was thinking of switching to futures instead of options. Mainly to avoid the bad spreads and decreasing time value. With options I like to scale into positions. I was thinking how I could do that with futures, it seems I would need for example upwards of 2500$ cash per ym future. So as to avoid margin troubles. Although someone even advised 10000$. I'm basically getting my head round the proper money management. Any feedback would be appreciated a lot. I understand that some are skeptical against position trading futures but I don't see a lot more risk than with options, if properly managed. Especially on the short side, I would rather double up if a trade turns against me. Considering my initial reason for that trade still stands.

Regards,

Chuck.
 
Quote from Chuck Krug:

I've been swing trading options for a while now and I was thinking of switching to futures instead of options. Mainly to avoid the bad spreads and decreasing time value. With options I like to scale into positions. I was thinking how I could do that with futures, it seems I would need for example upwards of 2500$ cash per ym future. So as to avoid margin troubles. Although someone even advised 10000$. I'm basically getting my head round the proper money management. Any feedback would be appreciated a lot. I uderstand that some are skeptical against position trading futures but I don't see a lot more risk than with options, if properly managed. Especially on the short side, I would rather double up if a trade turns against me. Considering my initial reason for that trade still stands.

Regards,

Chuck.
More...

I would advise carrying at least half of the total value of the contract that you are trading for each contract that you will use to enter into a scale in program. If not, you will need to have your stops too tight to withstand noise and commissions.
 
Thanks buy1sell2
I enjoyed your posts on position trading futures and now I think I understand the way you managed those trades a bit more.
 
Quote from Chuck Krug:

Thanks buy1sell2
I enjoyed your posts on position trading futures and now I think I understand the way you managed those trades a bit more.
More...

Thanks-- I try not to overextend. The big boys can stay in there all day and I don't want them to shake me out.
 
One other thing I would mention about the 2500 versus the 10,000:With the 2500, you would be prudent to only lose $50 per trade as opposed to the 10,000 where you could lose $200. You've got a bit more room to maneuver with the 10,000 and you may be able to get some winning trades. To be honest, it is difficult to keep from getting stopped out for $50. I actually use a lot more than half of a contract (ie ES half is about 32k) per contract, so that I can stay in longer and have the move work for me. Does this bring my return percentage down? I don't think so, because I let the winners run full.
 
I'm also thinking about a worst case scenario.

i think i'll open a separate acount at another brokerage just to trade futures. i'm looking to trade 10 ym so i'll put in 12500, that way if the market moves against me in a big way, that account will blow up, but not my main account.
 
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