Margin differences

[emg]

Quote from StarDust9182:

I am an equities trader taking a course in futures. I asked a question that the PFGBest instructor couldn't answer and also the best real trader I know (a San Diego well-known trader) and he didn't know either. I was hoping some one here might know an answer.

What is the reason that initial margin and maintenance margin are different?

By my reasoning, margin requirements are protecting the exchange and secondly the broker against the retail trader. It is a limit on leverage which is a deadly game in the wrong hands with potential of systematic risk. So if margin (= protection) is needed then why have two different levels?

Thanks in advance for your input.

margin account is u are borrowing money from a brokerage meaning u do not own anything. The futures exchange does not own physical goods. therefore, an initial and maintence margins must be setup in order to protect itself.

Initial margin means to if a trader wants to keep his/her position open after the market closed, must meet the intial margin requirement.

Maintence margin means the amount of money where a loss on your futures position requires you to allocate more funds to bring the margin back to the initial margin level.

Good Luck

 

[nakachalet]

Quote from StarDust9182:

To close the loop. I now understand why there is a difference between the two margins. Thanks very much for the PMs and comments. Perhaps I can return the favor someday.

To my heckler Nakachalet and the mythical Neil: For some reason you have chosen not to respond to my PM. I am not surprised. I must admit you really surprised me as to why someone with no clue about the subject would write in. I will wait for your PM apology to me and the other readers, if you have any class at all (no pun intended).

I try (sheesh I am human) to live by a rule I used to tell my friends: When you know what you are talking about, speak up; when you don't know what you are talking about shutup and you will soon be thought of as wise beyond measure. Apparently I have some ways to go yet ...

A simple google search will lead to:
<UURL>http://www.pfgbest.com/education/introtofutures/<UURL>
and under the research education menu is the intro to futures which I am taking.

My only link with them is as a student so I can't judge the quality of their offerings other than to say I am enjoying my course and my instructor immensely although that my change with my midterm test in a week!

sorry, busy trading....

WHEN YOU are trading for living, time is of the essence....

don't you agree, fellow traders?

here is all the info you need.

neil said it is ok to give out this info for the benefit of others as well.

he and family are getting ready to fly to prague (?).... to meet up with some friends....

there is really no need to prove who is right, ok? traders always let their bottom lines speak for themselves with utmost eloquent....

cheers, my friend.