Trading futures and options on futures involves a large degree of leverage. Successful traders must have a strong understanding of how this leverage works, when to apply it and what consequences it may have on your risk. This leverage comes to us in the form of performance bonds; also known as margin requirements. In order to effectively understand leverage, we must understand margins. Here is an example of how margins work the process varies slightly depending on the exchange: Trading Futures and Options on Futures involves substantial risk of loss and is not suitable for all investors.
Opinions, market data, and recommendations are subject to change without notice. Past performance is not indicative of future results. Contact Us Information Crucial to Trading Success. This means that once the trade is initiated, we can lose 9 pts without having to deposit more funds. We can trade that contract for a lot less depending on the margin leverage your broker provides. Maintenance margin must be available in the account by 4: Hence, if we do not have enough to cover the maintenance margin, we would be on margin call.
Note that intraday margins are different. Intraday margins are set by your broker. Intraday margin varies based on our traders specific experience levels, trading plans, and needs. The lower the margin, especially intraday margins, the higher the leverage and riskier the trade. Leverage can work for your as well as against you, it magnifies gains as well as losses.
Margin rates for CME products can be found by clicking here. For ICE, they are listed here. For Eurex, they can be found here. Trading Disclaimer Trading Futures and Options on Futures involves substantial risk of loss and is not suitable for all investors. Stage 5 Trading Corp.More...