- How is the margin for gold futures determined?
- Where exactly can I look to find the current margin (pls, state website)?
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2 Answers
The initial margin is $5940 and maintenance margin $5400. A simple search of Comex Gold Margin gives the CME group site. You then need to specify CMX metals to see the margins.
Gold is currently about $1300. A gold future is 100 oz. So the full contract is worth $130K. You want to 'go long' so you enter into a contract for Dec '14. You put up $5940, and if gold rises, you gain $100 for each $1 it goes up. Likewise on the downside. If gold drops $5.40, you lost $540 and will get a call to end the position or to put up more money. It's similar to stock margin requirements, only the numbers are much lower, your leverage with futures is over 20 to 1.
answered Jul 21, 2014 at 21:24
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Tnx Joe, but what exactly is the difference between initial and maintenance margin? Maintenance of what? Is the +$540 of the initial margin something like a registration fee? Sorry if I sound silly, but I am trying to find my way in this seemingly complicated matter.– KalypsoCommented Jul 22, 2014 at 7:13
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Your broker may add additional margin requirements above the minimum set by the exchange. So you may find that you have higher margin requirements if you get to CME through a third party broker.– PabTorreCommented Oct 3, 2015 at 2:39
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Note that the margin does vary... at the start of 2008, the initial margin was $3375. early 2010 $6747. Early 2012 $10125. Early 2013: $6600. Early 2014 $7975. May 2015: $4125. Commented Dec 12, 2015 at 0:37
The initial and overnight margin requirements are set by the exchanges (who calculate them using the Standard Portfolio of Analysis of Risk, or 'SPAN' system), and positions are market to market according to these at the end of the trading session.
To find these margin requirements you will need to consult the website of the exchange on which the contract you are trading is issued (i.e. if you're trading on the London Metal Exchange it's no good looking at the Chicago Mercantile Exchange's margin requirements as a previous answer suggests!).
However, for positions entered and exited within the same day, the daytrade margin rate will apply. This is set by your broker rather than the exchange, and can be as little as 10% of the exchange requirement. You can find a useful comparison of different margin types and requirements in the article I have published here: Understanding Margin for Futures Trading.
