Variation margin is an effective tool in futures trading


2018-12-14 22:00:39




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To understand such a term as "variation margin" you must decipher what is margin in the General sense. So, margin – a certain amount of money that is received by one party guarantees the fulfillment of the conditions to the transaction the other party. The basis of this concept lies in the fact that if repay the margin side will be insolvent and will not be able to fulfil certain obligations, then the party that took the margin will be able to repay it using its open position. To put it differently, the margin can be considered important enough means of payment by which clearing firms will be able to manage high risk in the field of stock trading.

Variation margin represents the daily profit or loss account on a futures contract trader. In other words, the financial result in cash terms at the end of each trading session of the market.

In the case of profit variation margin is positive, but if the trader the loss, the index has a negative value and the resulting amount will be deducted from your account at the end of the clearing.

The Main difference from the futures transactions in shares - in terms of receipt of funds in the account. So, when the futures transactions the money is charged or received every day, regardless of the actual sale, and stock the money in the account will be available only in the time of sale.

Try to understand a specific example. Value of one share of the company is 200 RUB and the trader buys it for the same 200 rubles. the share Price increased to 220 rubles., but while the stock is not sold, the profit on the account are received.


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Now the other option transactions with the same shares – futures operation, which will see the margin calculation. Acquired trader single futures contract on shares of this same enterprise in the moment when the price on the securities market was 200 RUB, the Price of this futures will be 20,000 rubles (each futures contract includes 100 shares). In order to become the owner of one of the futures, the trader is obliged to pledge collateral in the amount of 12% of 20000 rubles 2400 rubles Each day for summarizing the results of the transaction. For example, at the end of the first day the share price increased to 220 rubles, accordingly, grows and the futures price to 22000 RUB. the Positive difference in 2000 rubles is credited to trading futures account, despite the fact that the position is not closed and the future itself is not sold. This difference is the variation margin and positive.

Calculation of variation margin for the following day based on the prices of futures to 22000 RUB. In the case that the market in this day closes on the stock price at 21300 RUB, it will be decrease in comparison with previous day for 700 RUB, which shall be deducted from the futures account. Thus, the trader receives a negative variation margin.

As you can see from the above example, the main display of the result from transactions in the futures market is the variation margin, which in itself displays a positive thing when using it. This income regardless of whether the sale of futures, in contrast to the operations with securities in the stock market.

However, there are disadvantages in the application of this tool in futures trading. Is the likelihood of cheating negative margin to the complete cessation of funds on account of the trader in case the movement of the stock price in a losing side. Therefore to hold the future in their broker will be required to Deposit additional money into the account, otherwise this position can be forcibly closed, that will bring certain losses to the trader.

On the stock market securities such situations do not arise because buying is paid the full value of the stake, not 12% margin as in futures transactions.

Variation margin on various futures contracts is calculated on the basis of the algorithms presented in the specifications of these futures. Specification is a document exchange that contains the main parameters of the contract. It was there discussed, and a percentage of the value of shares of the collateral.

Comments (1)

2019-10-09 в 16:19:53

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I lost quite a large sum of money in my early days in trading due to some fake bots and strategy but i am happy that i am winning trades efficiently with the least of $500 daily from wins . You can reach me on my Whatsapp on +441613541049 or via email on the above

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