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Margin: initial vs maintenance vs day trading


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Margin: initial vs maintenance vs day trading

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  #1 (permalink)
 ALC77 
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I'm confused about margin. My broker for ES: $5,500 initial, $5,000 maintenance, $500 day trading.

1. If I ONLY want to day trade, do I need $5,500 initial margin in my account per 1 lot (ES)?

2. If I ONLY want to day trade, do I need $5,000 maintenance margin in my account by 4 pm CT per 1 lot (ES)?

3. If ONLY day trading the ES, I must buy after 8:30 am CT and sell by 4:00 pm CT, correct?

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  #3 (permalink)
 tr8er 
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If you only day trade, the day trading margin is valid the entire trading-day (5pm to 4pm CT)

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 Grantx 
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ALC77 View Post
I'm confused about margin. My broker for ES: $5,500 initial, $5,000 maintenance, $500 day trading.

1. If I ONLY want to day trade, do I need $5,500 initial margin in my account per 1 lot (ES)?

2. If I ONLY want to day trade, do I need $5,000 maintenance margin in my account by 4 pm CT per 1 lot (ES)?

3. If ONLY day trading the ES, I must buy after 8:30 am CT and sell by 4:00 pm CT, correct?

As I understand it:
As long as you are in and out of your position in a single day trading period, you are only subject to the initial margin.
If your account falls below the maintenance margin during the course of the trading day then you will get a margin call to deposit more funds.
If you carry your position open past the close of markets on any given day, then you would be subject to the maintenance margin.

So when you open your position, the initial is taken by the the broker as security for the duration of the trade. Keep a position open overnight and you will need to cough up the maintenance amount as well.
Check the CME for open and close times. Your broker will give you this info as well.

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 ALC77 
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Grantx View Post
As I understand it:
As long as you are in and out of your position in a single day trading period, you are only subject to the initial margin.
If your account falls below the maintenance margin during the course of the trading day then you will get a margin call to deposit more funds.
If you carry your position open past the close of markets on any given day, then you would be subject to the maintenance margin.

So when you open your position, the initial is taken by the the broker as security for the duration of the trade. Keep a position open overnight and you will need to cough up the maintenance amount as well.
Check the CME for open and close times. Your broker will give you this info as well.

Where does the $500 day trading margin come into play then?

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 Grantx 
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What instrument are you talking about? That would help clarify.

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 tr8er 
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he wrote that he trades ES and day trading margin means day trading margin.

So if your broker allows you to day trade with this $ 500.-- margin, you can trade 10 contracts with a $ 5000.-- account.

Of course it is theory and would be "stupid" to use it that way.

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 xplorer 
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ALC77 View Post
Where does the $500 day trading margin come into play then?

My understanding is slightly different from @Grantx's -

Initial margin: you need this to start trading at all.

Day margin: you can go down to this level as long as you trade only within day market hours (means you can't keep a position open after the market's official closing time)

Maintenance margin: you need this level if you intend to keep a position open after market's official closing time, in other words, keep positions open overnight.


So, to recap


ALC77 View Post
I'm confused about margin. My broker for ES: $5,500 initial, $5,000 maintenance, $500 day trading.

1. If I ONLY want to day trade, do I need $5,500 initial margin in my account per 1 lot (ES)?
Yes, if you have not traded before

2. If I ONLY want to day trade, do I need $5,000 maintenance margin in my account by 4 pm CT per 1 lot (ES)?
No

3. If ONLY day trading the ES, I must buy after 8:30 am CT and sell by 4:00 pm CT, correct?
I don't follow the ES, but I think when they refer to day trading they mean when the 23-hour Globex session starts and stop, essentially you can trade within those 23 hours - I may be wrong on that


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 xplorer 
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@ALC77

Another point: depending on your broker's requirement, it may be that the 5500 USD initial margin may be what they require if you intend to carry positions overnight, but if you do not, even the initial margin may be considerably lower.

Again, this is a per-broker requirement so you may be better off checking with them.

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 GFIs1 
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With Interactive Brokers you have different margins for every contract.

Here the example of today for German DAX Future: in EURO

Intraday Initial 1 14338.46 FIRST contract DAY
Intraday Maintenance 1 11470.77 2nd to x contract DAY
Overnight Initial 28676.91 FIRST contr. Night
Overnight Maintenance 22941.53 2nd to x contract over night

Sorry - table does not work nicely
Hope this helps
GFIs1

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 ALC77 
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xplorer View Post
My understanding is slightly different from @Grantx's -

Initial margin: you need this to start trading at all.

Day margin: you can go down to this level as long as you trade only within day market hours (means you can't keep a position open after the market's official closing time)

Maintenance margin: you need this level if you intend to keep a position open after market's official closing time, in other words, keep positions open overnight.


So, to recap

That help's clarify things. So, when is the market's official closing time then for the ES?

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Futures are a highly leveraged trading product. Margins are "good faith deposits" that a trader must maintain in order to trade a particular product. There are three different types of margins:

Initial Margin
As the highest amount required for a contract, this comes into play on the first day that an account decides to hold a position through the trading session. Meaning, if a trader buys a contract and does not want to close it out in the same session, this amount is required per contract. Initial Margin is set by the exchange (not by the FCM/broker)

Maintenance Margin
The amount set for this category is also provided by the exchange. It represents the requirement to hold a contract from the second trading day and onward.

Intraday Margin
This is the amount an account needs to trade one (1) contract. It is also the lowest of the three listed. Insofar that the product is traded within the trading hour/session, this is the amount required. Intraday margin is set by the FCM/broker and may vary between firms.

Please note that margin rates differ from one product to another. Margins are quoted as one (1) contract and are subject to change at any time.

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 xplorer 
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ALC77 View Post
That help's clarify things. So, when is the market's official closing time then for the ES?

E-mini S&P 500 Futures Contract Specs - CME Group

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 cory 
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Futures are a highly leveraged trading product. Margins are "good faith deposits" that a trader must maintain in order to trade a particular product. There are three different types of margins:
...

no clue on first trading day vs second trading day, now it's all clear, thanks.

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ALC77 View Post
I'm confused about margin. My broker for ES: $5,500 initial, $5,000 maintenance, $500 day trading.

1. If I ONLY want to day trade, do I need $5,500 initial margin in my account per 1 lot (ES)?

2. If I ONLY want to day trade, do I need $5,000 maintenance margin in my account by 4 pm CT per 1 lot (ES)?

3. If ONLY day trading the ES, I must buy after 8:30 am CT and sell by 4:00 pm CT, correct?

1. No. You need to know what amount is required by the brokerage for day trading. Typically, day trading margin rates would be lower than initial margin required by the exchange.

2. Day Trading Maintenance could be a little more complicated. Some firms require that your balance does not fall below a certain minimum others may have other requirements.

3. No. you need to ask the firm what specifically what they consider day trading hours. Some would quote the hours you said, while others may consider 5PM CST as a start until the next day's close.

I hope this helps.

Thank you,
Matt Z
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