Is margin variable according to price, and why? | Traders Hideout


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Is margin variable according to price, and why?

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Legendary Market Wizard
Houston, TX
 
Trading Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
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I built a cash flow/futures margin at risk model once for a NYMEX Energy Futures book, probably ten years ago now. Initially I just started with a VaR model but the big errors in the model predictions were all days when the margin level changed. As such I had to also build a model that predicted margin changes. I don't remember the exact details any longer, but the best predictor I could find of a margin requirements was the X day ATR. So at least back then, margin requirements were most heavily influenced by volatility.

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