Futures (Commodities) Trading and Margin?
Saturday, March 6th, 2010 at
2:19 am
westphalia1 asked:
Is it true that the LOWER the maintenance margin requirement on certain commodities (Mini Futures, Corn, Oats) the riskier that commodity is? As opposed to the Higher (priced) maintenance margin futures. True? Not true?
Is it true that the LOWER the maintenance margin requirement on certain commodities (Mini Futures, Corn, Oats) the riskier that commodity is? As opposed to the Higher (priced) maintenance margin futures. True? Not true?
Tagged with: Futures Commodities • Futures Trading • Oats
Filed under: Commodity Trading
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No. It’s the opposite. The higher the margin requirement…the riskier the underlying investment.
Hope this helped.
No, and you can reduce your risk dramatically when you use options along with your futures contracts. Thats what I used to do.
It’s not that straightforward.
It’s the margin as a percentage of the overall contract value. Lower maintenance margin doesn’t tell you anything – it depends on the price and number of bushels/oz or whatever you’re buying. The margin on a platinum contract could be $5000, but if platinum is trading at $3000/oz, that could well be a lower margin % than $2500 on a soybean contract, etc.
But generally speaking, the lower the margin, the lower the perceived daily risk, so the opposite of your statement.