How margin rules have changed

[long]

I started trading commodities futures in 1998. At that time it was through a small farm town brokerage that charged $75 commission on a round turn. You called them up and placed trades over the phone. When I traded with this broker I could put on a trade if I didn’t have enough to cover it in my margin account. I’d just get a margin call the next day and have 3 days to send a check or wire the funds. If I held a soybean position and placed a stop loss order it didn’t count against my margin requirement. The same applied to a profit target order. I only had to have margin for the actual contracts that I held, open orders didn’t count unless I was adding on. So if the required margin to hold a soybean contract was $1000 I could hold one contract and have an open stop loss and have an open take profit order with just a $1000 account balance.

These days I’m using a discount brokerage platform and entering my own trades for a $2.50 RT commission. But……if I want to hold one soybean contract and have the same two open orders that are exit orders I have to have a $3000 balance. This cuts my leverage by at least half.

Long story short, my old brokerage only required margin for open positions while my current brokerage requires margin for unfilled open orders. Even if the orders reduce position size if filled.

Are there any discount brokers that manage margin requirements like my old broker? I mean if I take a position and place both a stop loss and a profit taking order I don’t have much leverage at all using my current brokerage.

 

[Overnight]

So if the required margin to hold a soybean contract was $1000 I could hold one contract and have an open stop loss and have an open take profit order will just a $1000 account balance.

Mmmm, i have *think* I have seen your nick floating around before...It is real simple...You cannot open a futures contract beyond what your NLV allows, based on Performance Bond requirements of the contract. Are you trading a CME or ICE contracts?

 

[long]

Mmmm, i have *think* I have seen your nick floating around before...It is real simple...You cannot open a futures contract beyond what your NLV allows, based on Performance Bond requirements of the contract. Are you trading a CME or ICE contracts?

Mostly CME and sometimes ICE. I just know that at the old brokerage I could put the trade on as long as my account wasn’t negative. I would be instantly on margin call if I still held the contract after the session closed and I would just put a check in my brokers mailbox that evening so he could post it the next morning. I took a long hiatus from trading and when I came back the leverage potential dropped through the floor. I was always drawn to futures because of the leverage but now I feel that it isn’t much better than un-leveraged stocks. I have put ZERO time into developing a single stock strategy. I’d like to have my leverage back.

One variable I didn’t mention is that I was technically an agricultural hedger at the first broker but I didn’t claim that status at my current brokerage. As a hedger the required margins are lower but I’m not aware of any other differences other than how taxes are handled.

 

[d08]

Same story with IB. Their technology is quite good but they have the absolute worst risk management team, at least from a customer standpoint. I figure they realised that they can just churn these retail traders to nothing while theoretically offering decent margin, which is only true if you're trading low liquidity indexes. I'm daily fighting the absurdly strict margin requirements and it's killing my trading. I don't expect it to change because there's a new retail sucker born every day.

 

[zdreg]

Same story with IB. Their technology is quite good but they have the absolute worst risk management team, at least from a customer standpoint. I figure they realised that they can just churn these retail traders to nothing while theoretically offering decent margin, which is only true if you're trading low liquidity indexes. I'm daily fighting the absurdly strict margin requirements and it's killing my trading. I don't expect it to change because there's a new retail sucker born every day.

Every broker has tradeoffs.You choose the one that best suits your trading niche.

 

[schizo]

I started trading commodities futures in 1998. At that time it was through a small farm town brokerage that charged $75 commission on a round turn. You called them up and placed trades over the phone. When I traded with this broker I could put on a trade if I didn’t have enough to cover it in my margin account. I’d just get a margin call the next day and have 3 days to send a check or wire the funds. If I held a soybean position and placed a stop loss order it didn’t count against my margin requirement. The same applied to a profit target order. I only had to have margin for the actual contracts that I held, open orders didn’t count unless I was adding on. So if the required margin to hold a soybean contract was $1000 I could hold one contract and have an open stop loss and have an open take profit order with just a $1000 account balance.

These days I’m using a discount brokerage platform and entering my own trades for a $2.50 RT commission. But……if I want to hold one soybean contract and have the same two open orders that are exit orders I have to have a $3000 balance. This cuts my leverage by at least half.

Long story short, my old brokerage only required margin for open positions while my current brokerage requires margin for unfilled open orders. Even if the orders reduce position size if filled.

Are there any discount brokers that manage margin requirements like my old broker? I mean if I take a position and place both a stop loss and a profit taking order I don’t have much leverage at all using my current brokerage.

Technically, stop loss and profit target are merely exit orders (aka OCO orders) and should not be counted towards the margin. Who is your broker?

 

[schizo]

This is from Amp futures. Here, you need $2,400 (per lot) in your account to open a trade. Anytime your account falls below this amount, your position will be automatically liquidated.

As for depositing additional funds after receiving a margin call, those days are long gone. Most brokers, if not all, will simply close out your trades and lock you out until you send more moolah.

 

[poopy]

View attachment 339021

This is from Amp futures. Here, you need $2,400 (per lot) in your account to open a trade. Anytime your account falls below this amount, your position will be automatically liquidated.

As for depositing additional funds after receiving a margin call, those days are long gone. Most brokers, if not all, will simply close out your trades and lock you out until you send more moolah.

Those figures are DT and maintenance. Initial (held overnight) will be higher.

 

[BMK]

As for depositing additional funds after receiving a margin call, those days are long gone. Most brokers, if not all, will simply close out your trades and lock you out until you send more moolah.

That may well be the case for futures. But with stock and options, many brokers will still give you time to respond to a margin call by adding funds, or by selling something else in your account, or by closing the position yourself.

We are in the US, and our broker is Schwab. We had a margin call a couple weeks ago. We transferred funds the next morning, using ACH. Not a fed funds wire transfer. No fees.

In another case, we were able to substantially reduce the option requirement on the account, and free up funds for new positions, simply by closing a few naked short VIX calls that would have expired worthless the next morning. Closed them for $.01 each (x 100 multiplier = $1.00). The fees and commissions to do that were six cents per contract.

We do not have portfolio margin. We are approved for naked short options.

I'm not going to disclose our account value LOL

It is above the $25K threshhold so we don't have to be concerned about PDT rules. It is below Schwab's requirement for portfolio margin.

 

[newwurldmn]

Same story with IB. Their technology is quite good but they have the absolute worst risk management team, at least from a customer standpoint. I figure they realised that they can just churn these retail traders to nothing while theoretically offering decent margin, which is only true if you're trading low liquidity indexes. I'm daily fighting the absurdly strict margin requirements and it's killing my trading. I don't expect it to change because there's a new retail sucker born every day.

the best financial firms are the ones that protect their firm above all their clients. At the end of the day these firms are really insurance companies betting you won’t default.