Margin Calls

[Engy]

Since energy ftrs contracts are daily settled, what happens when the price of the contract has a ridiculously large move either in the positive or negative direction? Does Exchange enforce margin call that same day? How long do you have to post margin before the trader's position is liquidated? Are there any exceptions to that rule?

 

[day4night]

Fund or liquidate in 1 day.

 

[Engy]

Does anyone have thoughts or know of talks that had gone on for portfolio margining for commodities markets?

Something similar to the pilot that ran for equities

http://www.prmia.org/Chapter_Pages/Chicago/Doug Engmann - Portfolio Margin Jun 07.pdf

Thanks!

 

[heech]

Quote from Engy:

Does anyone have thoughts or know of talks that had gone on for portfolio margining for commodities markets?

Something similar to the pilot that ran for equities

http://www.prmia.org/Chapter_Pages/Chicago/Doug Engmann - Portfolio Margin Jun 07.pdf

Thanks!

already implemented for 20 years. Search for CME and SPAN.

 

[Engy]

Sorry, for clarification: pg 5 of those slides

"All portfolio margin calls are due in
three business days, but brokers may restrict activity or require liquidation
sooner if uncovered margin calls result from risky positions"

That was the subtle point that I should have pointed out for question in my earlier post... If this 3 biz day rule was ever piloted for commodities?

 

[Rtrader2525]

Every broker is different, I was on call once in 07 in a wheat corn spread debacle for over a week.

 

[usman88]

agreed....depends upon relationship with your broker
if its a good one they allow your account to drop till $1000-$1500 NLV (Net Liquidation value)

 

[Engy]

To clarify, the brokers always meet margin calls from the Exchange on the day of, and sometimes allow that trader to post margin at a later time/date? So does that mean from the Exchange's perspective, whenever they call margin, it is always met that same day for that position, yes?

 

[Engy]

Quote from usman88:

agreed....depends upon relationship with your broker
if its a good one they allow your account to drop till $1000-$1500 NLV (Net Liquidation value)

To clarify, you bought into the front month futures contract at the time yes? Or were the margin calls, on your position on options for the futures contract?

So when margin is not met and 'position is liquidated,' is the position on the options on the futures contract or the futures holdings sold?

Thank you. Newbe to the trading aspects.

 

[day4night]

"A Clearing Member in default shall immediately make up any deficiencies in its security deposit resulting from such default prior to the close of business on the next banking day."

http://www.cmegroup.com/rulebook/NYMEX/1/8.pdf

However RTrader and usman88 are right also, but from the trader's perspective; as long as the broker has money to cover your margin call, well, extending you credit or not becomes a business decision.