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noob question about price, margin, tick values


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noob question about price, margin, tick values

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  #1 (permalink)
 3lliot 
Sydney, Australia
 
Experience: None
Platform: NinjaTrader
Trading: European Minis
 
Posts: 10 since Sep 2018
Thanks: 1 given, 15 received

As far as I can gather from Internetting:

FDXM Dax mini:
IB margin: 2836.14
Contract price: ~12100
tick value: 5

FESX Euro Stoxx 50 mini:
IB margin: 1569.9
Contract price: ~3350
tick value: 10

(in euros)

Say I have 6k in my IB trading account.

Dax

I can trade 2 Dax minis, but I'm buying 2 contracts that actually cost 12,100 (24,200)

The tick value of the Dax is 5, so with 2 cars, every tick up / down my account effectively gains / loses 10 euro.

Stoxx

I can trade 3 Stoxx minis, but I'm buying 3 contracts that actually cost 3,350 each (10,050)

The tick value of the Stoxx is 10, so with 3 cars, every tick up / down my account effectively gains / loses 30 euro.

So the underlying asset that I can trade with my account size for the Dax is worth a lot more, but price movement actually translates to quite a lot less - because of the smaller tick value.

Is the above correct? Or am I missing something obvious?

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  #3 (permalink)
ElectricSavant
Maricopa, AZ.
 
 
Posts: 24 since Sep 2018
Thanks: 1 given, 6 received


As part of your calculations you might consider the movement...what is the range of each instrument? What can I expect? Does each instrument move tick for tick?...Can I trade this instrument? Liquidity...etc

ES




3lliot View Post
As far as I can gather from Internetting:

FDXM Dax mini:
IB margin: 2836.14
Contract price: ~12100
tick value: 5

FESX Euro Stoxx 50 mini:
IB margin: 1569.9
Contract price: ~3350
tick value: 10

(in euros)

Say I have 6k in my IB trading account.

Dax

I can trade 2 Dax minis, but I'm buying 2 contracts that actually cost 12,100 (24,200)

The tick value of the Dax is 5, so with 2 cars, every tick up / down my account effectively gains / loses 10 euro.

Stoxx

I can trade 3 Stoxx minis, but I'm buying 3 contracts that actually cost 3,350 each (10,050)

The tick value of the Stoxx is 10, so with 3 cars, every tick up / down my account effectively gains / loses 30 euro.

So the underlying asset that I can trade with my account size for the Dax is worth a lot more, but price movement actually translates to quite a lot less - because of the smaller tick value.

Is the above correct? Or am I missing something obvious?


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  #4 (permalink)
 tr8er 
Europe
 
Experience: Advanced
Platform: TradeNavigator, BookMap
Trading: ES, CL, 6E, 6B
 
Posts: 472 since Jan 2017
Thanks: 29 given, 412 received

With an 6k account it wouldn't be smart to trade 2 contracts (with each 2800 margin), if the market would move against you lets say 35 points in the mini-dax (and this can happen within minutes or sometimes within seconds) you get a margin-call. (the value of the mini-DAX is 60k+ euros, points x € 5.--)

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  #5 (permalink)
 3lliot 
Sydney, Australia
 
Experience: None
Platform: NinjaTrader
Trading: European Minis
 
Posts: 10 since Sep 2018
Thanks: 1 given, 15 received

I thought the value of the Dax is 60k and the value of the Dax mini is 12k? isn't that why they were created? it's a smaller contract. it's not just trading the Dax with a crazy margin. a 35 point move would only be €350.

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  #6 (permalink)
 erlendsol 
Os, Norway
 
Experience: Advanced
Platform: Ninjatrader
Trading: ES, FDAX
 
Posts: 3 since May 2011
Thanks: 3 given, 1 received


3lliot View Post
I thought the value of the Dax is 60k and the value of the Dax mini is 12k? isn't that why they were created? it's a smaller contract. it's not just trading the Dax with a crazy margin. a 35 point move would only be €350.

The notional value of the FDXM is approx. 60k (12000 * 5) and the FDAX approx. 300k (12000 * 25).

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  #7 (permalink)
 tr8er 
Europe
 
Experience: Advanced
Platform: TradeNavigator, BookMap
Trading: ES, CL, 6E, 6B
 
Posts: 472 since Jan 2017
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3lliot View Post
I thought the value of the Dax is 60k and the value of the Dax mini is 12k? isn't that why they were created? it's a smaller contract. it's not just trading the Dax with a crazy margin. a 35 point move would only be €350.

as erlendsol already said, the real value of a contract = points x point-value, so the value = FDAX 300k, FDXM 60k

not sure what you mean by: a 35 point move would only be €350.--?

Exact this €350 move would be the problem with your account:
2xmargin = 5672,28 + loss 350 = 6022,28 (but your account size is 6000, so it would be to small)

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  #8 (permalink)
 3lliot 
Sydney, Australia
 
Experience: None
Platform: NinjaTrader
Trading: European Minis
 
Posts: 10 since Sep 2018
Thanks: 1 given, 15 received

Right maybe I have the wrong idea about how it all works.

As a hypothetical situation, say you have an account with $10,000 in it, you're a position in a contract with a margin of $5,000 and a point value of $10. You still have $5,000 left in your account.

If the market moves 10 points against you, does that 'eat into' your remaining balance by $100?

So the market would have to move 500 points against you to trigger a margin call?

Or do I have it all wrong?

I see that my initial example below was a bad one - with $6k in my account, being in a position with 2 contracts of around 2,800 margin would leave nothing in my account to cover a swing against me.

Is the rule of thumb to always have at least twice the margin in your account before trading one contract?

edit: also yes I see that the actual value of the contract is the 'price' (points) x the point value - obvious really.

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  #9 (permalink)
 tr8er 
Europe
 
Experience: Advanced
Platform: TradeNavigator, BookMap
Trading: ES, CL, 6E, 6B
 
Posts: 472 since Jan 2017
Thanks: 29 given, 412 received

This is correct

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