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Margin and maintenance requirement at different brokers
I have been using TD Ameritrade since I had a retirement account there already.
For futures they have a buying power requirement that is the margin + maintenance. For the e-Mini S&P that is $13,400 per contract. One contract does not allow some of the money management strategies I have read about. The question I have is either a broker where this total buying power requirement is less, by a lot. Or is there a different e-mini which has less hit, like maybe $5,000 a contract.
I have looked at the micros. But the commissions makes using them a waste of time. On TDA the commission is the same per contract so if you got 10 contracts to match one for ES you pay about $66 per two sided trade. You only make $50 for a one point scalp.
After TDA's application was down two days this week I am OK with looking at another broker, but in general I like ThinkorSwim so would like to stay. By the way TDA does not charge for data they way some brokers do.
Can you help answer these questions from other members on NexusFi?
Based on your comment and my experience, TD's commission and margins are not competitive. I'm currently using Interactive Brokers, Ninja and Transact. If want to discuss, send me a message and I'll try to discuss my preference for brokers, commissions and margins and other pros and cons.
Thanks tonylou.
TDA commission is $1 per side more than even Schwab. There is a merger in the works which I think is end of the year. I don't know what Schwab will change but maybe will reduce the commissions.
The comparisons are complicated because TDA only charges for commissions and fees but TOS if free and data is free. Their cost depends on how many trades you do. And of course their higher commissions.
But there is some technical issue with TOS. This week it was down two full days. That is the worst I have seen, but it has been down at various times for an hour. Something is not totally reliable there. I guess I can open a small account at Ninja and try out their tool to see if I can get used to it.
Thanks so much for your answer.
The purpose of margins is, first, margins provide leverage to trade futures products, and second, margin requirements try and ensure that whoever is trading has enough money in their account to cover adverse market moves. There are two numbers to be aware of when trading; initial margin and maintenance margin. Initial margin is the amount needed per contract to hold a position through the close and satisfy a margin call. Maintenance margin, which is usually 80%-90% of the initial margin, is the amount of money per contract required to continue holding your position through the following sessions.
However, day trading margins are set by the brokerage firm and can be much less than the CME's initial/maintenance margin requirements. Some firms, such as Edge Clear, like to limit day margins to 25%-50% of the initial margin. Others can go as low as $500/contract. In turn though, this increases your leverage and risk when trading. Low margins are a double edged sword, as lower margins mean you have higher leverage and therefore higher risk.
I hope this helps! Have a great weekend!
Please call us with any questions 773.832.8320 or 844.TRADE20. Trading Futures is not suitable for all investors. Past Performance is not indicative of future results.
