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Margin requirements
- Thread starter Vinny1
- Start date
This may be a dumb question, but:
When i initiate a position, how does the brokerage firm know if i intend to daytrade it or hold it for a few days.
There is a big difference between needing $1000 to initiate a daytrading position and $4000 to initiate an overnight position, so how do they know my intentions?
Putting account minimums aside for the time being, i assume one could enter a position with only $1000 in their account (thus bypassing the "$4000 initial margin") and it wouldn't be a problem unless that position was held until the end of the day.
As well, if somebody had enough for "maintenance margin" but not enough for "initial margin", why couldn't they enter the position saying they intend to daytrade it, but then at the end of the day hold the position and say it's "OK" since he has enough to maintain the position.
Thanks once again (trying to understand the process)
When i initiate a position, how does the brokerage firm know if i intend to daytrade it or hold it for a few days.
There is a big difference between needing $1000 to initiate a daytrading position and $4000 to initiate an overnight position, so how do they know my intentions?
Putting account minimums aside for the time being, i assume one could enter a position with only $1000 in their account (thus bypassing the "$4000 initial margin") and it wouldn't be a problem unless that position was held until the end of the day.
As well, if somebody had enough for "maintenance margin" but not enough for "initial margin", why couldn't they enter the position saying they intend to daytrade it, but then at the end of the day hold the position and say it's "OK" since he has enough to maintain the position.
Thanks once again (trying to understand the process)
The firm does not know if you intend to do a daytrade or position trade. We assume you are doing a daytrade until 3:14pm CST rolls around. At that time, if we are on top of it, you will get a call then or soon after telling you about the margin call and that you need to get out at the reopening (3:45pm CST) or wire funds to cover the margin call.
Craig
Craig
Originally posted by thereuare
As well, if somebody had enough for "maintenance margin" but not enough for "initial margin", why couldn't they enter the position saying they intend to daytrade it, but then at the end of the day hold the position and say it's "OK" since he has enough to maintain the position.
The first day that you have this position on at the end of the day you're required to have the initial margin requirement in your account. If you don't you get a margin call for the difference between the initial requirement and your account's net liquidating value. Broker's and clearing firms are already well familiar with the margin games played by their customers.
Guerilla is technically right, but in practice all you need is the maintenance margin to put on a positon. For some reason GMI, (the program that margins accounts and generates account statements for most FCMs) does not requie you to have the initial margin to put on the position. Therefore, the only time initial margin comes into play is when you go on margin call. If you fall below maintenance, you have a margin call and need to bring the account back above initial margin to get off margin call.
Craig
Craig
It all boils down to the broker.
I have unitentionally traded the ND while trying to trade the NQ (future source symbol for ND is NQ, figure that) had less than 2000 in the account and traded 2 contracts. (Margin for that is 38,000) It was an internet platform.
I also know with this broker I can enter a trade at about 25% margin and hold on for about 3 days before RJObrien starts to get pushy.
Point being, the broker can give lots of leeway in daytrading margins or position initiation margin.
I have unitentionally traded the ND while trying to trade the NQ (future source symbol for ND is NQ, figure that) had less than 2000 in the account and traded 2 contracts. (Margin for that is 38,000) It was an internet platform.
I also know with this broker I can enter a trade at about 25% margin and hold on for about 3 days before RJObrien starts to get pushy.
Point being, the broker can give lots of leeway in daytrading margins or position initiation margin.