Having a bit of trouble of understanding maintenance margin?

[sopodo]

Hey Guys,

Can someone please explain to me

The maintenance margin on a $500 emini s&p 500 contract is at 75%. Which will be $375. So if my emini trade touches $375 I am safe as long as it rises back up again. But let's say it goes below $375 by 1 tick. Then I would get a margin call. I can either sell my position at a loss or will the broker freeze my account and I will I need to deposit more funds into my account to get the account back to the maintenance margin level of $375? or back to the initial margin of $500?

To add to the above, to deposit funds can take 2 to 3 days via wire transfer. Now in that time if my account further drops in value, if it drops by too much will my broker not wait for the wire transfer of funds to come and just freeze my account and liquidate my position as I imagine he has the power of authority. Then once the funds arrive and my account is back to the margin level then they would unfreeze my account to let me trade again, is that how it works?

I hope you can please answer these questions as I am pretty loss on this.

Many thanks in advance

 

[Martinghoul]

Why are you asking this question here? The only meaningful answer you're likely to get will have to come from your particular broker.

 

[Splitlink]

Hey Guys,

Can someone please explain to me

The maintenance margin on a $500 emini s&p 500 contract is at 75%. Which will be $375. So if my emini trade touches $375 I am safe as long as it rises back up again. But let's say it goes below $375 by 1 tick. Then I would get a margin call. I can either sell my position at a loss or will the broker freeze my account and I will I need to deposit more funds into my account to get the account back to the maintenance margin level of $375? or back to the initial margin of $500?

To add to the above, to deposit funds can take 2 to 3 days via wire transfer. Now in that time if my account further drops in value, if it drops by too much will my broker not wait for the wire transfer of funds to come and just freeze my account and liquidate my position as I imagine he has the power of authority. Then once the funds arrive and my account is back to the margin level then they would unfreeze my account to let me trade again, is that how it works?

I hope you can please answer these questions as I am pretty loss on this.

Many thanks in advance

When I started trading I found these things out by myself as I went along. I knew when I was going to run out of money and common sense told me that I would not be able to trade again until I sent them cash. It's not rocket science, how do you expect it to work?

You keep asking these questions on a new thread and I'm wondering whether you should be allowed loose.

 

[sopodo]

When I started trading I found these things out by myself as I went along. I knew when I was going to run out of money and common sense told me that I would not be able to trade again until I sent them cash. It's not rocket science, how do you expect it to work?

You keep asking these questions on a new thread and I'm wondering whether you should be allowed loose.

Many thanks for all your replies

I know it's not rocket science...I have been trading on a simulator, but it's just that in the simulator you have an initial margin of $5,650 and a maintenance margin of $4,500. I will be having a $500 margin account with a broker and so I haven't experienced through a simulator true 1:1 live trading because of the difference in margin from sim to live trading. I have spoken to a number of brokers as well. I agree it is a common sense that when you run out of cash you won't be able to trade again until you have deposited more money into your account. But that is not what I am asking. I am trying to learn whether my account will be frozen if I dip too below the maintenance margin? And as well if they will liquidate my positions if my account continues to dip too much below while I am sending a wire transfer for more money to top up my account? And I am asking whether you need to top up back to the maintenance margin level or to the initial margin level?

I would really hope you or anyone can please take the time to answer these questions. As I have browsed websites for an answer and only find the typical margin and maintenance margin talk and not one single answer to my above questions. I would really appreciate it if you could please help me as these questions are crucial to know before I move to live trading which will be a while as I got loads more learning to do.

Many thanks in advance

 

[Splitlink]

Ok. Most brokers and spreadbetting firms run on software, these days. The programmes are designed to close you down when you reach your margin level. They don't ask questions they just do it. There might be exceptions, each company is different in its approach to clients. You simply have to ask around because no-one here knows more than his own experience with his broker. Also, a broker may treat one client differently to another.

 

[meanreversion]

Many thanks for all your replies

I know it's not rocket science...

Rocketry is a branch of engineering. It's not a "science".

 

[Splitlink]

Rocketry is a branch of engineering. It's not a "science".

It's a common expression nowadays. Everyone knows what it is. Tell him about margin requirements, which he wants to know .

 

[barjon]

Here's the theoretical position:

Margin call

When the margin posted in the margin account is below the minimum margin requirement, the broker or exchange issues a margin call. The investors now either have to increase the margin that they have deposited or close out their position. They can do this by selling the securities, options or futures if they are long and by buying them back if they are short. But if they do none of these, then the broker can sell his securities to meet the margin call - Wikipedia

and here's how one sb broker plays it - which is somewhat tougher than the theory:

11. Margin Close Out Level
11.1 If the Margin Level for your Account reaches or
falls below the Margin Close Out Level, this will
be classified as an Event of Default under clause
16. In such circumstances we may, among other
things, close all or any of your Open Positions
immediately and without notice and refuse to
execute new Trades until your Margin Level is
100% or greater. We will close your Open
Positions at Our Price prevailing at the time
when your Open Positions are closed.
11.2 We may but are not obliged to contact you before we
take any action under clause 11.1.

 

[sopodo]

Many thanks everyone for their replies very useful info

Here's the theoretical position:

Margin call

When the margin posted in the margin account is below the minimum margin requirement, the broker or exchange issues a margin call. The investors now either have to increase the margin that they have deposited or close out their position. They can do this by selling the securities, options or futures if they are long and by buying them back if they are short. But if they do none of these, then the broker can sell his securities to meet the margin call - Wikipedia

and here's how one sb broker plays it - which is somewhat tougher than the theory:

11. Margin Close Out Level
11.1 If the Margin Level for your Account reaches or
falls below the Margin Close Out Level, this will
be classified as an Event of Default under clause
16. In such circumstances we may, among other
things, close all or any of your Open Positions
immediately and without notice and refuse to
execute new Trades until your Margin Level is
100% or greater. We will close your Open
Positions at Our Price prevailing at the time
when your Open Positions are closed.
11.2 We may but are not obliged to contact you before we
take any action under clause 11.1.

Hi,

Thanks for this list on how it all works