Margin Requirements
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Margin Requirements ( Acrobat Reader required)
What is Margin, how does it work?
Initial margin is the deposit required to maintain either a short or long position
in a futures contract, it is NOT a cost. The maintenance margin is the amount of
initial margin that must be maintained for that position before a margin call is
generated. The maintenance margin level is NOT additional to the initial margin.
For example if the initial margin for silver is $1,000 and the maintenance margin
level is $750, one would need to have $1,000 allocated from their account as initial
margin to trade a silver contract, and if the silver position lost let's say $300
one day, the value of the $1,000 initial margin would now only be $700, which is
below the $750 maintenance requirement. Therefore, excess funds in the amount of
$300 from the account would be automatically allocated towards bringing the initial
margin figure back to $1,000. If there were not excess funds in the account to automatically
bring the initial amount back up to $1,000, that position would create a margin
call situation and that margin call would have to be either immediately met with
additional funds or the position would be liquidated.
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