Hello all. This is my first post and I think this place is absolutely awesome for anyone even remotely interested in trading. I have a question I hope someone can help me out on.
I am about to make the leap from paper trading (12 months) to live trading and had a question regarding margin requirements. These are not something I ever had to pay attention to during simulation, and there is little documentation on how the actual process works.
My question is "How are initial margin, maintenance margin, and intraday margin interconnected?"
Basically, we have scenario #1. The account size is $5000 (I know, too low, but keeps it simple). I want to buy and close a single contract of 6E in one day. Does the initial margin come into play ($5400) or do I get to use only the intraday margin ($500)? In other words, does my account go down to $4500 or do I get an error of not enough funds on the first attempt to buy?
Initial Margin is what you need to have in your account to be able to put on that position.
Maintenance Margin is the amount that if you go below it you will be on the dreaded margin call. You will then need to get your account to above the Initial Margin level to get off of margin call by either getting rid of contracts or sending in more money.
These two are mainly used if you keep position overnight.
Different places may have different rules regarding margin. Also some places will add additional margin on top of the SPAN minimum margin required.