To me, this is the perfect example of why I trade through an FCM that allows $500 margins. I keep the minimum amount I need to trade the max # of contracts I wish, and the rest of my money is in the bank. I've seen some on here tout 5K, 10K even 15K per contract in their account. It's not the size of the account that is important, its the size of the liquid assets behind the account that matters.
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Don't trust the CME/CBOT clearing companies to withstand their guaranties. Instead of cash, use t-bills as margin
I still remember in 1987 crash Tudor Jones saying over and over in a financial liquidity crises the weakest link is the segregated funds.
The first thing Tudor he did was to sell all of his seats , pull all of his money out of margin accounts and put it into t-bills....oh..but first he loaded the boat going long 30 year bonds
This simply draws you to the riskiest FCMs, insuring that whatever money you use for margin is always at maximum risk. LOL.
Why not study the policies/practices and financial statements of the firm(s) you use? For instance, IB keeps excess funds in a securities account, insured by SIPC up to $100K cash. So you can say you're using $10K to margin an ES, but only the minimum margin is used for margin purposes by IB. Overnight this is approximately $4-$5K. If you're holding overnight positions your maximum exposure in a futures account is the minmum overnight margin. But in terms of capital, IB dwarfs most of these firms like Velocity.
If you're day trading only, IB holds your money other than profit and/or loss in an insured securities account, in contrast to these other firms like Velocity.
These were all considerations of mine when I originally opened my IB account..........safety in the event of financial problems. I would not put my capital with a firm where I couldn't invest my funds directly in T-Bills. I also would not choose a firm using $500 margin for ES. These guys are in the crosshairs of huge potential risk, and therefore, huge possible risk to me, though not of my own doing.
OldTrader
I'm the same way. I trade through an old school CBOT local firm that's capitalized with 10 mil of their own money and they have good risk controls without being pain in the ass. My rates are better than anything I've seen out there. (granted I trade some volume). PLUS they take my phone calls and work pit traded options for me. Yea it helped that I was a member so I have a relationship but the cost of SPIC insurance vis a vis' an extra buck a contract at IB would be a severe hurdle for me.
Firstly, the sub-exchange-minimum margins offered are for INTRADAY only. No one (really) cares what happens to your account INTRADAY regarding futures, other than the trader himself. To that end, brokerages worth a salt, monitor and assess risk of INTRADAY trading and make earnest efforts to prevent HUGE blowups caused by INTRADAY trading.
Sub exchange-minimum-INTRADAY- margins are a benefit to traders, not a detriment or financial burden to an FCM.
On the other side however, unlike your brokerage, most worthy brokerages will not indiscriminately force liquidation, (let alone force liquidation during exchange-sanctioned trading hours). Again, brokerages worth a salt will make earnest effort to determine a traders intention. Regardless, not until the exchange closes for accounting is the FCM affected. Only then are exchange minimum (at a minimum) performance bonds required to put on deposit for all open positions at that time. This is what affects an FCM financial condition.
Now please explain...
If you're day trading only, IB holds your money other than profit and/or loss in an insured securities account
So you are saying IB requires no margin to hold a contract intraday? And drawdowns are actually SIPC insured? So IBs recent upping of margin requirements has no bearing on the trade. That would explain why there is no discernable difference between intraday and overnight margin at IB.
If you're holding overnight positions your maximum exposure in a futures account is the minimum overnight margin.
If you were short an index contract Thursday night Im sure you would disagree with your statement. I'm sure there are few FCMs that could have used guaranteed loss protection too.
I would not put my capital with a firm where I couldn't invest my funds directly in T-Bills. I also would not choose a firm using $500 margin for ES. These guys are in the crosshairs of huge potential risk, and therefore, huge possible risk to me, though not of my own doing.
"Investing" directly in T-Bills is an option at many brokerages/FCMs. The minimums however may be out of reach for alot of "retail" accounts.
When you understand how futures actually work, you will understand that sub exchange-minimum-INTRADAY-margins are a benefit to traders, not a detriment or financial burden to an FCM, or any account held at such FCM.
Osorico
i didn't think ib allowed one to hold t bills to trade stocks or futures against? even if they did 2 very important drawdowns. #1 it allows you to hold zero overnights against the tbills so you effectively are stuck day trading. #2 the tbil is still in street name and is not in your name so if ib goes under its counted as a security for sipc. people do treasuries inside a broker account to get the 500k sipc vs the 100k of cash protection