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Brokerage or Method that will reduce overnight margin costs.
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Brokerage or Method that will reduce overnight margin costs.

  #1 (permalink)
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Brokerage or Method that will reduce overnight margin costs.

I am currently trading the Swiss Franc.

I trade only the Franc in both of two separate accounts, both of them are smaller sized accounts. I trade long in one account and short in the other account. I do this so I can be long and short at the same time if necessary.

My trading technique requires me to hold positions overnight.

Overnight margin on the Franc is about $2,400 per contract. At that rate I can only afford to trade a couple contracts in each account.

My question is does anyone know of any brokerage or have any ideas or methods that would allow me to reduce my overnight margin to the number of contracts that I am either net long or net short between the two accounts?

So, for example if I am short 5 contracts in one account and long six contracts in the other account, is there a way to pay overnight margin on just the one net long contract? Afterall, that is my actual net risk.

I have heard that SPAN does something similar to this but only within one account (not between two or more accounts) and only on accounts that are worth over 100k.

Thanks,
Bryan

 
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  #3 (permalink)
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Why not using a single account and manage two synthetic/virtual positions ?

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  #4 (permalink)
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SuperBliss View Post
I am currently trading the Swiss Franc.

I trade only the Franc in both of two separate accounts, both of them are smaller sized accounts. I trade long in one account and short in the other account. I do this so I can be long and short at the same time if necessary.

My trading technique requires me to hold positions overnight.

Overnight margin on the Franc is about $2,400 per contract. At that rate I can only afford to trade a couple contracts in each account.

My question is does anyone know of any brokerage or have any ideas or methods that would allow me to reduce my overnight margin to the number of contracts that I am either net long or net short between the two accounts?

So, for example if I am short 5 contracts in one account and long six contracts in the other account, is there a way to pay overnight margin on just the one net long contract? Afterall, that is my actual net risk.

I have heard that SPAN does something similar to this but only within one account (not between two or more accounts) and only on accounts that are worth over 100k.

Thanks,
Bryan


I have never understood the logic of being long and short at the same time, except for bookkeeping purposes. It seems like a pretty expensive way to bookkeep (less efficient use of margin, more commissions being spent).

Do what @sam028 says: manage the positions outside of your account. Add them together in your head, or on a sheet of paper. Trade only the net position.

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  #5 (permalink)
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sam028 View Post
Why not using a single account and manage two synthetic/virtual positions ?

Indeed NT software allows you to simulate being long and short at the same time.

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  #6 (permalink)
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sam028 View Post
Why not using a single account and manage two synthetic/virtual positions ?

I run multiple strategies on the same market so I have to have two separate accounts in order to be long and short at the same time.

NinjaTrader has the ability to run multiple ATM strategies that trade in opposite directions but it is very limited and doesn't work the way I need it to.

Trying to create synthetic / virtual positions that behave the same way being long and short at many different price levels doesn't work when you get down to the nitty gritty.

Another problem is translating risk / reward parameters. Treating each trade as a separate individual trade with its 'own' contracts makes handling risk / reward simple and clear. Trying to combine the risk/reward parameters of one trade with another trade synthetically is a bit more complicated. Trying to combine the risk/reward parameters of many trades in one synthetic position is not only extremely complex but would require many more transactions as the price moved up and down.


Last edited by SuperBliss; December 7th, 2013 at 11:21 PM.
 
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You may use calender spreads to reduce your overnight margin, but the broker has to supported identify the spreads and the recommended margins by CME.

eg .If you are long 6S dec contract and want to hold it overnight, at the end of globex session, you may sell 6S mar contract to hedge your position...next day buy back the 6S mar contract to continue your long position....this way the margin required for overnight hold would be about 25% of the outright contract margin.

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  #8 (permalink)
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indiantrader View Post
You may use calender spreads to reduce your overnight margin, but the broker has to supported identify the spreads and the recommended margins by CME.

eg .If you are long 6S dec contract and want to hold it overnight, at the end of globex session, you may sell 6S mar contract to hedge your position...next day buy back the 6S mar contract to continue your long position....this way the margin required for overnight hold would be about 25% of the outright contract margin.

Two issues comes to mind::

1) in currencies, non-front months have very little volume and liquidity. On Friday, for example, the volume on Mar 14 6S was 13% that of the Dec 13 contract. One consequence is that you'll pay more in slippage entering the out market.

2) if you try this in other markets, where the back months have more volume, the risk is that the front month and the back months do not behave the same price wise.


The bottom line is that you can take any X number of strategies, and combine them to create one super strategy, which is then traded live. It may take some detailed logic and coding, but my experience is that in the long run, the benefits (reduced number of accounts, reduced margins, reduced commissions, reduced slippage costs) greatly outweigh the costs (time spent coding and debugging).

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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SuperBliss View Post
So, for example if I am short 5 contracts in one account and long six contracts in the other account, is there a way to pay overnight margin on just the one net long contract? Afterall, that is my actual net risk.

I have heard that SPAN does something similar to this but only within one account (not between two or more accounts) and only on accounts that are worth over 100k.

Some brokers have master accounts and sub-accounts. Margin is calculated at the master account level, so in your example (Short 5, Long 6) you would only be margined on the Long 1 position. I don't have a list of which brokers do this but it may be something you want to investigate/consider if margin is that tight.


kevinkdog View Post
I have never understood the logic of being long and short at the same time, except for bookkeeping purposes. It seems like a pretty expensive way to bookkeep (less efficient use of margin, more commissions being spent).

^+1

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SMCJB View Post
Some brokers have master accounts and sub-accounts. Margin is calculated at the master account level, so in your example (Short 5, Long 6) you would only be margined on the Long 1 position. I don't have a list of which brokers do this but it may be something you want to investigate/consider if margin is that tight.


^+1

Thanks for the feedback.

I will definitely look into other brokers. So far the two I have asked have told me that its not possible.

Also, as far as being long and short at the same time i agree there are some drawbacks when considering book keeping.

For me, the advantage of being long / short the same time is how this method effects me emotionally / psychologically. I feel like I have more time to think, prepare, strategize, etc about the market and the price action than if i'm trading uni-directionally.

Also, i feel like there are opportunities that arise from being long / short at the same time that are less difficult to find compared to trading uni directionally.

I refer to those opportunities as useful-risk opportunities. To me useful-risk opportunities can be described, for example, as when one trade's loss overlaps with another trade's gain.

Most importantly, I'm very curious as to what others are experiencing with their trading.

Do you mind if I ask what psychological advantages / disadvantages you experiencing with your trading at the time?


Last edited by SuperBliss; December 9th, 2013 at 07:58 PM. Reason: grammar

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