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IB demo account margin doubt
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IB demo account margin doubt

  #1 (permalink)
Trading Apprentice
new york
 
Futures Experience: Intermediate
Platform: IB
Favorite Futures: options
 
Posts: 2 since Dec 2014
Thanks: 1 given, 0 received

IB demo account margin doubt

Hi,

I have a demo paper IB account. I currently have 1 million to begin with. I dont understand the below statement:


Quoting 
The total maximum margin position that can be held in each tradable security, regardless of the leverage used, the number of trades made for that security and the use of derivatives that reference to the same product, is limited to $ 400,000. In particular, this means that for instruments that give the possibility to use leverage, such as Forex or Futures, the limit applies on the initial margin requirement required to open the position, not the notional of the underlying security

What does this mean. Does it mean, that the maximum amount that can be deployed to open a position is 400k or does it mean the amount that can be borrowed for a particular trade.

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  #2 (permalink)
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  #3 (permalink)
Elite Member
Berlin, Europe
 
Futures Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
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To enter a position in a futures contract an initial margin is required. The margin is the money that sits in your account to cover potential losses stemming from that open position.

The statement above limits the exposure that you are allowed to take with regard to a single security. If you open a position in a futures contract, you are not allowed to open a position that would require an intial margin greater than $ 400k.


Example:

Let us assume that you wish to open positions in ES 12-14 and CL 01-15. Let us further assume that you wish to hold the positions overnight. The margin requirements are listed here:

https://www.interactivebrokers.com/en/?f=margin&p=fut

For ES the initial margin (overnight) is $ 5,750 per contract. As your total initial margin for a single trading instrument may not exceed $ 400 k, the statement above puts a limit on your trade size for ES at 69 contracts.

The initial margin (overnight) for CL is $ 6,063 per contract. This limits your trade size for CL to 65 contracts.

With an account size of $ 1 million, you would be able to open both positions 69 contracts for ES and and 65 contracts for CL simultaneously, because the account size is larger than the initial margin of $ 790,845 that is required.

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  #4 (permalink)
Trading Apprentice
new york
 
Futures Experience: Intermediate
Platform: IB
Favorite Futures: options
 
Posts: 2 since Dec 2014
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Thanks a lot for this. Cleared my doubts

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