Margin Calculation
Variance Futures calculates initial and maintenance margin requirements using the SPAN margin system. SPAN Margin stands for Standard Portfolio Analysis of Risk Performance Bond System. It refers to the margin required on a long or short futures contract. The Margin requirement on a futures contract is referred to as a "performance bond". These rates are set by the exchanges on which the contracts trade. Margins can change without notice, and in some instances may be higher than the rates set by exchanges.
For an order to be executed through Variance Futures, the account must have "cash available"
Margin Calls
A futures account has a "margin call" when the equity (or net liquidating value) in the account falls below the Maintenance margin required by the exchange or brokerage firm carrying the account, whichever is higher.
Any account that begins the day with a margin call will have no cash available to open new positions until the margin call is satisfied.
How Margin Calls are Calculated
At the end of each trading day the equity in your futures account is compared to the Initial and Maintenance Margin requirements set by the exchange(s).
If your account has equity that is greater than the Initial Margin the difference may be withdrawn by you or used to purchase additional contracts.
This excess is known as "cash available". If your account has equity that is less than the Maintenance Margin requirements set by the exchange then you have a margin call. The amount of the call will be the difference between the equity in your account and the Initial Maintenance requirement.
You will be notified of all margin calls via email on the day the call is incurred. All margin calls must be met immediately. No additional opening transactions or cash withdrawals will be allowed in any account with an outstanding margin call.
In some cases, you may be subject to margin calls on an intra-day basis. You may also be required to meet margin calls in as little as one hour. If you don't meet a margin call in the time required, your positions may be liquidated and you will be responsible for the loss in your account. If you have questions about our margin policy, please refer to your Account Agreement.
High Risk Accounts
If your account has been under supervision, or has demonstrated any of the following patterns of behavior, or we determine in our sole and absolute discretion, your account may be classified as a high risk account if:
- You trading at the maximum allowable position for your account most of the time.
- You leaving a debit balance in your account.
- Your account has sustained a large loss in one trading day.
What Happens if Your Account is Determined to be a High Risk Account?
Accounts labeled as a high risk accounts will not be granted intraday trading margins and will subject to greater margin requirements.
This additional margin provides protection to the brokerage firm in the event of a sustained price movement of the product traded by you.
Overnight / Past Close Positions for High Risk Accounts
If you are holding overnight positions or past the close of the market - your positions may be liquidated or partially liquidated to bring your exposure down by our risk department. In addition, the FCM's risk personnel may impose greater overnight margins on your account if you have a pattern of carrying overnight positions and not meeting your margin calls (i.e. - a client that got a margin call on Tuesday and having the same call unmet on Wednesday).
For any questions regarding margin calculation please contact our trading desk.
It is important to understand the math and policies of margin requirements so that it does not come to you as a surprise while you are trading.
* Please note that unlike securities, there is no difference in the initial margin requirements for long or short futures contract positions.
