FAQs – Futures Trading
I’m trying to clarify if I understand how margin is calculated for futures. Can you spell this out for me?
This is an area for which we receive several questions. Let’s begin with the assumption that a futures trader has been approved to trade futures, and they intend to put on an opening position and fund their futures account with an initial deposit of $10,000. In order to put the initial futures position on, the approved futures account must have enough buying power to cover the Initial Maintenance Requirement for that specific contract.
For example, if the initial maintenance requirement on the S&P E-Mini contract is $5,000, then an account with $10,000 of available funds will be able to purchase or sell short 4 contracts on standard 2 to 1 margin or 8 contracts upon approval as a “qualified account (entitling them for 4 to 1 margin.)
The specific computational formula is:
Available funds = A
Margin Multiplier = B
Initial Maintenance Requirement = C
A × B ÷ C
For our example the $10,000 account with 2 to 1 margin will have $20,000 in buying power and can thus purchase or sell short 4 contracts. (10,000 X 2)/5000=4
In order to continue holding the position, the Maintenance Requirement, which is lower than the Initial Maintenance Requirement, must be maintained. Let’s continue our example with the S&P E-Mini contracts which have a Maintenance Requirement of $4000. This means that the account must maintain $16,000 in buying power to hold the original 4 contracts. At 2 to 1 margin, that translates to $8,000 in equity. If the equity falls below $8,000, the account will trigger a margin call and a deposit of additional funds or liquidation of part or all of the open futures positions will be required.
OK, I understand that Lightspeed will maintain (2) two separate accounts for equities and futures. My question relates to P&L, will I see my overall P&L anywhere or do I have to keep track of that on my own?
Individual positions that you initiate for Equities, Options, and Futures will all be displayed in your Positions Window on Lightspeed Trader intraday, and will be combined there for your net P&L calculations.
Accounts can be funded using either fed wire transfer from your bank or by sending us a check drawn from a bank account that lists your name (i.e. the same legal name as what appears on your Lightspeed account.