Margins

[Dlewis 10]

Hello everyone,

 

I have a few questions. What is the Initial Margin and Intraday Margin that brokers require? My understanding is that for Intraday Margin you must have X amount in your account to trade that day?!?!

 

Thanks D.......

[ScottB 10]

Hi,

 

Initial margin is the amount per contract to enter a position, maintenance margin is how much you must have per contract to hold those contracts once you purchase them.

 

If your account had $10,000 in it and the initial margin were $5,000 per contract, you could purchase 2 contracts. If the maintenance margin is $3,500 per contract, you can hold those 2 contracts as long as your account has $7,000 in your account.

 

If your account were to go down to $6,999 due to an adverse move against your positions, the broker would issue a margin call and depending on the situation (and the broker) could liquidate 1 contract or require you to add funds to your account.

 

One terrible reason for holding on to losing positions is the difference between these two margins. You can stay in more positions based on the maintenance margin than you can purchase given you are flat.

 

I hope that helps.

 

Scott

[Josh7 10]

Does anyone know the requirements in order to be approved for a Tier 2(standard margin) so I could do spreads for TDA? I took a look at the application https://wwws.ameritrade.com/cgi-bin/apps/Main. I figured they would require you have an income of $25,000-$50,000 as well as net worth of 50-90k and large number of years of experience.