Leverage/Margin

Leverage/Margin –
○ Futures margin is the amount of cash money  traders must have on hand with their broker once they open a futures position.
○ Because most contracts are set to expire in short amount of time , traders are generally allowed to put only a marginal portion of the contracted value for a contract .
○ Futures traders have access to a big amount of leverage via their futures exchange, in addition brother leverage ( double leverage)
○ Leverage/Margin are often good if you’ll use it wisely and bad if you don’t have risk management plan .
○ Leverage are often a double edge sword because on one side you’ve got the power to form decent profit while on the opposite side you’ll lose quite a worth. For future trading, to guard from against losses always ensure that you have tight stop loss . Always trade safe..!!

○ Initial margin is the equity required to initiate a futures position. this is kind of surety bond . the utmost exposure isn’t limited to the amt of the initial margin, however, the initial margin requirement is calculated using estimated change in contract value within a trading day. The initial margin is set by the exchange.
• If a trade position is an exchange-traded product, the amt or % of the initial margin is set by the exchange .
• In case of loss or if the value of the initial margin is being eroded then the broker will make a margin call  to recover the initial margin available. Often mentioned as “variation margin”, margin called,  is typically done on a daily basis . However, during high volatility, a broker can make a margin call intra-day.
• Margin calls are usually expected to be paid and received on an equivalent day. If not, the broker has the right to shut sufficient positions to satisfy the amt called. After the position is closed out the client is responsible for any resulting deficit within the client’s account.
• Some U.S. exchanges also use the term “maintenance margin”, which in effect defines what proportion the worth of the initial margin can reduce before a call is formed . However, most non-US brokers only use the term “initial margin” and “variation margin”.
• The Initial Margin requirement is set by the futures exchange , in contrast to other securities’ Initial Margin (which is set by the Federal Reserve System within the U.S. Markets).
• If the margin drops below the margin maintenance requirement set by the exchange listing the futures, a margin call is issued to bring the account back to the specified level.

○ Maintenance margin
• A set minimum margin per outstanding derivative instrument that a customer must maintain in their brokerage account .