How much is this going to cost me?  Futures Margins & Trading Times Explained

One thing to consider when going into futures trading is how much capital you’ll need to trade on a day-to-day basis.  This is defined in part by the types of contracts you trade (see previous article) and partially by your margin. Margin is referred to as the cost of putting on a trade.  And, it is the amount set aside in your account for each contract you trade.  Your margin varies by the market and the session time (day/overnight).  Margin for futures is different than with stocks.  With futures, we aren’t paying interest and we are not borrowing money.  We are setting money aside that is already in our account.  Our margin acts as a security deposit for the trades we take because futures are highly leveraged assets. There are 4 types of margins in the futures market:

Initial margin is the minimum capital amount needed to open a trade.

Maintenance margin is the minimum capital amount needed to keep the trade open.  If your account falls below this amount your broker can liquidate your position without notice.  For example, with a $10,000 account… if your initial margin is $5000 and your maintenance margin is $3000, your broken would liquidate the position if your account lost more than $2,000 (the difference between initial and maintenance margins and your account size).  I know it sounds like a high school math problem, but it’s really that simple!

Excess margin refers to the money left over in your account in excess of the initial margin requirements to open positions.

Day Trading Margins are the amount set by your broker in order to enter into a trade in $ value per contract during market trading hours.  The day trading margins return to the initial margin requirements once the market closes. Once the market re-opens your broker will switch back to day trading margin requirements.

Many of these margins vary by brokerage, so make sure to visit your company’s website FAQ sections to identify their day/initial margin requirements. One benefit to trading futures is that it provides flexibility with trading times available to trade.  Unlike equities and options markets, global futures trading is open six days a week for 23 hours a day.  This provides multiple opportunities for traders to trade different market sessions including (US/Aussie/Asia/Euro).  A benefit to trading futures is that you can choose to trade faster market sessions like the (US/Euro) or you can trade the slower market sessions like the (Aussie/Asia). Markets are open for two main sessions during the day.  The US market session, or Day Session, runs from 9:30 AM – 4:15 PM ET.  The US market accounts for 30% of futures contracts traded.  The Aussie/Asia/Euro market session, also known as the Globex Session, runs from 4:30 PM – 9:30 AM ET.  Globex accounts for 70% of futures contracts traded.  Regardless of the session you choose, you’ve got plenty of diversity in your market offerings.