Can someone look at my worked example question for margin

[mouthwash]

Hi everyone. I am having trouble understanding margin and would like some help please.

For example at etrade to trade YM they say

Init. margin: $2500
Maint. margin: $2000

Is this for one contract?

Say I wanted to trade 5 contracts. How would I calculate the required margin?

Cheers peeps.

 

[frugi]

I assume it is for one contract as the amounts are very similar to Interactive Brokers' requirements.

You would need $2500 to open one trade (with one contract) and then once it is open you would need $2000 to keep the position open. If you lost $500 and closed out then you would not be able to open another position until your balance was above $2500 again.

So for 5 contracts you'd need $12500 to open and $10000 to stay in position.

 

[mouthwash]

What if you open the trade and immediately it jumps 10 points. Does your maintenance margin go down?

Cheers

 

[anley]

Tony

No, main. margin will stay the same even if the position goes massive in your favour. Of course though your account will be credited with this amount but it will obviously be in 'open profits' which is not the same as cold hard cash.

If you're new to the game do yourself a big favour and trade really small positions in relation to the cash you have. Learn what's going on, how things are handled then you can jump to bigger sized trades. Otherwise there's a good chance the mkt could force you to take smaller positions. ie, you blow a lot of money in the beginning so you account can only afford to trade small positions.

Remember the mkt will always be there for you to make money and the more experienced one becomes the less hard it is to make money. Note I said less hard rather than 'easier'

 

[mouthwash]

Thanks of the replies.
Nice range in the Dow yesterday.