How are Futures Margins Calculated?

Trading and Investing Helping Traders
, ,
1

I have a few questions on how the margins work in the futures market.
First, could you please explain how futures margins work?
For example, does it consider profits to add additional contracts or vice versa for losses?
Also, would day trading margins work the same day?

Thanks,
Des

1 Like
2

The CME determines futures margins requirements. Here is an example for the E-mini Micro Futures: https://www.cmegroup.com/markets/equities/sp/e-mini-sandp500.margins.html
As you can see, the CME shows the maintenance margin for the Futures contract. You should have a calculator ready if you wish to hold numerous Futures contracts in your trading account.

Let’s use a live example:
Let’s assume you are trading the Emini Micro contract and the initial margin is $1,000. (this is just an example).
Your account is $5k, so you can hold five contracts.
However, if your account gains $1,000 from these five contracts, you can hold an additional contract. Futures contracts are Marked to Market. The same works for losses; if the maintenance margins are, for example, 800 dollars, and you lose 1000, you must liquidate one contract pr add funds to the account. In Summary:

Initial Margin -This is the minimum amount set by a futures exchange to open a futures position. The exchange sets this margin, though your futures broker may also require you to deposit additional funds before you can begin trading.

Maintenance Margin: Maintenance margin is the amount of equity you must maintain in your trading account at any given time to cover potential losses on your positions. This amount is less than the initial margin requirement.

The same logic applies to day trading with a few caveats. First, day trading margins are determined by the clearing firm, corresponding brokers, and Introducing Brokers. Here is the list of our FCMs and their corresponding margin rates. Margin Requirements | Futures Trading | Optimus Futures
Most futures day-traders trade products close at 5 PM EDT/4PMEDT- stock indices, gold, silver, crude, bonds, etc.

Another example is using the MNQ (Micro Mini NASDAQ) and Micro Emini SP (MES). Margins on MEs could be as low as $50, and margins on MNQ could be $100, but either way, these are day trading margins and should exit them before the session ends unless you have the entire margin required by the CME exchange.

Use leverage wisely.

Thanks,
Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

2 Likes