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How is margin calculated in futures?
For index futures the intraday margin is set at 40\% of the normal initial margin while in case of stock futures the intraday margin is set at 50\% of the normal initial margin.
What are margins on futures?
Futures margin is the amount of money that you must deposit and keep on hand with your broker when you open a futures position. It is not a down payment, and you do not own the underlying commodity. The term margin is used across multiple financial markets.
Why do you need margin for futures?
Margins on futures contracts are typically 3\% to 12\% per contract. 2 The margin posted by a trader represents a good faith deposit that the trader must keep on hand with the broker. If the market moves in the trader’s favor, this leverage enables the trader to realize significant profits on even small price changes.
Who pays initial margin?
Initial margin is the percent of a purchase price that must be paid with cash when using a margin account. Fed regulations currently require that the initial margin is set at a minimum of 50\% of a security’s purchase price. But brokerages and exchanges can set initial margin requirements higher than the Fed minimum.
What is minimum margin?
Minimum margin is the initial amount investors are required to deposit into a margin account before trading on margin or selling short. A margin account allows an investor to buy securities long or sell securities short on a line of credit extended to the investor by the broker.
What are the margin requirements for futures?
According to Regulation T of the Federal Reserve Board, the initial margin is currently 50\% of the purchase price of securities that can be purchased on margin, but this level is only a minimum and some brokerages require you to deposit more than 50\%. For futures contracts, initial margin requirements are set by the exchange.
What is futures maintenance margin?
The maintenance margin is the minimum amount a futures trader is required to maintain in his margin account in order to hold a futures position. The maintenance margin level is usually slightly below the initial margin.
What is futures contract margin?
Futures contract. Performance bond margin The amount of money deposited by both a buyer and seller of a futures contract or an options seller to ensure performance of the term of the contract. Margin in commodities is not a payment of equity or down payment on the commodity itself, but rather it is a security deposit.
What is futures trading margin?
Margin is a critical concept for those trading commodity futures and derivatives in all asset classes. Futures margin is a good-faith deposit or an amount of capital one needs to post or deposit to control a futures contract.
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