How are maintenance margins applied?

Grantx

Grantx

IB has 4 margin categories:

1. Intraday Initial
If you want to open the position during the opening hours of the exchange, the initial intraday margin needs to be covered

2. Intraday Maintenance
To hold the position during the opening hours of the exchange you need to covert the maintenance margin

3. Overnight Initial
If you want to keep the position overnight you need to be able to cover the overnight initial margin right at the close of the exchange.

4. Overnight Maintenance
If you want to hold it after the close you need to be able to cover the overnight maintenance margin

So all of them apply to you if you open the position during the day and want to stay in the position overnight.

Lets use CL as an example. If I enter a single contract position during the day which I intend holding overnight then is the following correct:
I first need the intraday initial = $1500.
Then I need the intraday maintenance = $1200
Then the overnight initial as the exchange is closing = $3000
Then overnight maintenance as my position is held into the close = $2400.

So I need to have the sum of all those margins in my account to hold a single overnight contract= $8,100?
 
No, just the overnight initial margin.... and IB's margin requirements may be higher than exchange minimums.
 
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If I open a single contract trade at 09:30 GMT what applies? intraday initial or intraday maintenance?
If I hold into the close, at what point does overnight initial or overnight maintenance apply to me?
I guess Im confused with the difference between initial and maintenance. The exchange is either open or closed so why 4 different categories?
 
1. The exchange sets minimum initial margin amount and maintenance margin amount for overnight.

2. Brokers may require more or less margin intraday than the exchange minimum. (If the exchange sets "minimum" margin and the broker allows you to post less, perhaps the exchange's "minimum" is actually more of a recommendation than a requirement?)

3. The exchange "minimum overnight maintenance margin" or greater is usually/always? required for overnight hold. That goes into effect at the session close.

"Initial margin" is required so that you have enough money to "make the play"

"Maintenace margin" is required so that when a position goes against you there is still time for you to rectify the situation before going into deficit... that is wiping out your margin deposit entirely and more. Once you're below the maintenance margin amount, you can either quickly get more money into the account, reduce your position, or close out your position.

"Low initial day margins" allow for more leverage and smaller money to participate, and is up to broker discretion. During (RTH)... Regular Trading Hours... there is somebody at the broker constantly monitoring client positions for maintenance margin "infractions", if you will. Overnight... (1) there may not be anyone monitoring positions moment-by-moment as there is during RTH, and (2) with the American market closed for say 16 hours, lots of things can happen in Asia and/or Europe to cause your position to have a big fluctuation... the higher overnight maintenance margin requirement is there to provide a buffer and some degree of protection for both you and the broker for events which move the market significantly.

Don't know if it's still the case, but the last time I checked IB's margin requirements for the ES, both the initial and maintenance margin requirements were higher than exchange minimums. In a way that's a good thing... greater buffer of protection for both IB and the trader. (Back in '87, after the crashola, Refco sent out notice to customers that they preferred we not trade the S&P futures until things settled down.... but if we did, $50,000 initial margin was required.)

Maintenance margins are a good thing.... to hopefully prevent "losing some money" from turning into a disaster.

Because of broker discretion, you should ask yours "If I open a contract at ____ time, what margin requirement applies?".
 
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i still hold a grudge yes! but i'm just giving fair warning,, if your strategy has draw downs and you are trading futures or options, you do not want to use a broker that will increase margins on you.... The have in house market making, what kind of jump of logic does it take to realize they are on the otherside of liquidation trades? just saying.. i'm not a conspiracy theoriest, i don't care if they do or don't... Its just a fair warning.. and yes my resentment towards them comes from my own demise when i started out , and as well many other stories from fellow traders... so if somemone is making waves then poking holes in the canoe they gave you to float i'd say yes IB is not perfect! haha
 
This is news to me. I have an account with IB and also with Dorman. My preference is IB because my funds are held locally here in the UK and protected up to 50K. The money I have with Dorman is not protected and it worries me a bit.

Under what scenario would they increase my margin? What did they do to you cdcaveman?
 
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