How are maintenance margins applied?

Whoever has the $ makes the rules. Overnight brought up a good point - brokers have the right to liquidate your positions as your losses mount, even if have not hit the maint margin level. That was in all that fine print we sign off on opening the acct. You want to have enough cash in your acct so as not to trigger an auto liquidation. I have seen spikes in the overnight market that rocketed contracts up or down as much as $7K . Brokers will not be left holding the bag.
 
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Overnight said:
Going by Mr. Gumby's post of CL margin from IB, it would be $5,624 (Initial = $2,812*2), and then you factor in the net worth of the open position.
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Right. This confused me a lot when I started trading futures. My line of thinking was: I already have one contract, for which I need to have the maintenance margin. I buy an extra contract, for which I need the initial margin. I didn't understand why they would now see the whole position (being two contracts) as a new position and therefore require the initial margin for both contracts. But that is how it is: on the day you increase your position size you have to have the initial margin for the entire position. This is not IB-specific though, this applies to trading futures generally.
 
Overnight said:
So if you had $10,000 in the account at the start, and at end of day 3 you had two open positions at the entry price, your maintenance for those positions would be $5,624.
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Wouldn't your maintenance be $4500 for the two positions ($2,250*2)?
If you are flat at the end of day two with 2 CL positions open then that would leave you with $5,500 in your account?
 
Grantx said:
Wouldn't your maintenance be $4500 for the two positions ($2,250*2)?
If you are flat at the end of day two with 2 CL positions open then that would leave you with $5,500 in your account?
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If by "flat" you mean the position hadn't moved and was sitting at the entry price, then yes, you'd have $5,500, if you are required to have only $2,250 per contract.

The reason I brought up the initial as being in my mind is what I consider "maintenance", to maintain the position, is because on my broker statement it would look like this, using IB's numbers and your question...

Cash=+$10,000
Initial margin=-$5,624
Maintenance margin=-$4,500
Open equity=$0
Net liquidating value=+$4,376

Or if the position was down $2000 as I mentioned above, it would be

Cash=+$10,000
Initial margin=-$5,624
Maintenance margin=-$4,500
Open equity=-$2,000
Net liquidating value=+$2,376

They list both margin numbers, but deduct the initial from the account balance, not the maintenance. Therefore I always use that figure in discussions, to be on the conservative side of things. I don't know what other brokers do, but it would make sense if they did. You must ask them specifically to see how they indeed do it.
 
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