Newbie Question about margin, sorry

[minusatwelfth]

Hello, I'm new to futures trading and was wondering how to calculate the number of ticks or percent moving against me to activate margin call. I think I understand about initial margin, maintenance margin pretty well, but how does the intraday margin rate affect calculations?

Why do some brokers only have a $40 intraday margin for MES? Doesn't this increase the leverage to about x500, meaning just one tick moving against you will margin call? Furthermore some brokers like amp don't state the corresponding maintenance margin. Here's my current understanding with a solid example.

No intraday margin rate:
-Bob buys long 1 MES contract at initial margin of $1000. MES quote is at 4000points. So it's worth $5x4000=$20,000
-This means his leverage is 20x
-Let's say there is a 10% difference between initial and maintenance margins

10% /20 = 0.5%

Therefore if MES quote drops by 0.5%, i.e. it reaches 3980, margin call will be activated.

Now how does the addition of an intraday margin rate change this calculation?

 

[Nobert]

Hey minus,

please watch it through
https://www.elitetrader.com/et/threads/billionaire-with-no-leverage.356890/
& stay open minded.

Good luck.

 

[Ironbeam]

Hello, I'm new to futures trading and was wondering how to calculate the number of ticks or percent moving against me to activate margin call. I think I understand about initial margin, maintenance margin pretty well, but how does the intraday margin rate affect calculations?

Why do some brokers only have a $40 intraday margin for MES? Doesn't this increase the leverage to about x500, meaning just one tick moving against you will margin call? Furthermore some brokers like amp don't state the corresponding maintenance margin. Here's my current understanding with a solid example.

No intraday margin rate:
-Bob buys long 1 MES contract at initial margin of $1000. MES quote is at 4000points. So it's worth $5x4000=$20,000
-This means his leverage is 20x
-Let's say there is a 10% difference between initial and maintenance margins

10% /20 = 0.5%

Therefore if MES quote drops by 0.5%, i.e. it reaches 3980, margin call will be activated.

Now how does the addition of an intraday margin rate change this calculation?

The intraday margin does not affect this calculation. The intraday margin is what you need to stay above during the trading session to avoid liquidation by your broker. The initial/maintenance applies at market close if you planning on holding your position through the close and into the next trading session that begins at 5pm CT.

Make sense?

 

[CannonTrading_Ilan]

Hello, I'm new to futures trading and was wondering how to calculate the number of ticks or percent moving against me to activate margin call. I think I understand about initial margin, maintenance margin pretty well, but how does the intraday margin rate affect calculations?

Why do some brokers only have a $40 intraday margin for MES? Doesn't this increase the leverage to about x500, meaning just one tick moving against you will margin call? Furthermore some brokers like amp don't state the corresponding maintenance margin. Here's my current understanding with a solid example.

No intraday margin rate:
-Bob buys long 1 MES contract at initial margin of $1000. MES quote is at 4000points. So it's worth $5x4000=$20,000
-This means his leverage is 20x
-Let's say there is a 10% difference between initial and maintenance margins

10% /20 = 0.5%

Therefore if MES quote drops by 0.5%, i.e. it reaches 3980, margin call will be activated.

Now how does the addition of an intraday margin rate change this calculation?

Maintenance Margin is the margin level the exchange sets for Hedge accounts.

Hedgers initial margin and maintenance margin are the same.

Speculators have a 10% markup. This is the initial margin level to be followed in order to hold the position overnight, that is past the 5pm EDT close for equity products, other markets you trade may close earlier.

If you have initial margin to enter a trade and you carry it overnight, once your Liquidating value drops / settles below the maint. level, this is when you get a margin call. Good communication with your broker is key.


As for Day trading? Firms will set day trading margins as % of the overnight or a set $$ amount ( $500 for ES as an example). That allows day traders to be more aggressive and get in and out with larger size. It is a DOUBLE EDGE sword and the extreme low day trading margins can be risky and cause forced liquidation.

Must understand what the liquidation policy is over where you trade, normally broker and platform dependent.

Hope this helps.