MARGIN
If you have never traded on margin, welcome aboard! Understanding how margin works also has a small learning curve but, that's why we exist! To teach!

Each futures contract has its own margin rate that is set by the exchange. Margin is one of the fundamental differences between a futures and forward contract. It is margin that alleviates counter-party default risk. Margins are not stagnant and can change from time-to-time based on market volatility. As the underlying that the futures contract it is based on becomes more volatile the margins increase and vice-versa.

In futures trading margin is broken up into two parts. Initial Margin and Maintenance Margin.

This is how it works:

Initial Margin
You must have the initial margin in your account available to place the position. For example, if the Initial Margin for the NYMEX Gold is $3500 and you have $10,000 in your account you go long (buy) or go short (sell) up to 2 contracts.

2 x $3500 = $7000 ($3000 left over, however, not enough for a 3rd contract)

Maintenance Margin
If the Maintenance margin on the NYMEX Gold is $2000 then if you have 2 positions on and your account drops below $4000 (2 x $2000) then you must either top up your account back up to at least the Initial Margin ($7000) or close position(s).

As traders we look to futures as a way to access higher leverage and market opportunities that exist in commodities and the financial markets. The futures markets gives us access to the energy markets such as crude oil, gasoline, natural gas, the grain markets such as corn, wheat, soy beans, the meats such as live cattle, live hogs, pork bellies, the “softs” such as cotton, coffee, frozen concentrate orange juice, and the financials such as 30 year Bonds, T-bills, Eurodollars (not the Euro currency), the indices such as the Dow, the and the S&P, to name just a few.

 

CONTRACT MONTHS & YEAR

In futures trading we use a one letter symbol to represent a month and one number to represent the year.

CONTRACT MONTHS
F	January
G	February
H	March
J	April
K	May
M	June
N	July
Q	August
U	September
V	October
X	November
Z	December

 

Each futures contract trades different months. For example the NYMEX Gold trades only G, J, M, Q, V, and Z. The CBOT Soybeans trades F, H, K, N, Q, U, and X - however, not all months are the same - for example the September Soybeans contract doesn't trade that much. Most traders use the November and July contracts. Below is a snapshot taken from the CBOT website on July 17, 2007. Notice the volume and open interest on the NOV and JUL contracts. We have put it in red for you.

MONTH	ELECRONIC	OPEN AUCTION	CASH EXCH	TOTAL VOLUME	OPEN INTEREST
					AT CLOSE	CHANGE
07Jul	0	4	0	4	150	-652
07Aug	7,328	3,458	3,162	13,948	50,820	-697
07Sep	3,773	834	32	4,639	29,304	+88
07Nov	66,951	22,306	193	89,450	321,825	-3,974
08Jan	2,648	1,428	6	4,082	27,862	+959
08Mar	1,482	1,436	2	2,920	17,909	+337
08May	1,209	1,054	44	2,307	23,385	+129
08Jul	3,757	2,498	0	6,255	33,008	-364
08Aug	10	0	0	10	527	+2
08Sep	0	0	0	0	236	Unch
08Nov	4,575	5,056	8	9,639	48,735	+1,585
09Jan	41	20	0	61	287	+30
09Jul	1	0	0	1	202	+1
09Nov	144	378	0	522	5,168	+5
TOTAL	91,919	38,472	3,447	133,838	559,418	-2,551
Table generated July 17, 2007 08:04 CDT

 

TRADING HOURS
Each futures contract has its own trading hours. It's a good idea to have a look at the respective exchange website to view the best contract to trade (look for higher interest and volume) and the trading hours of the contract.

 

WANT TO LEARN MORE? TAKE A LOOK AT OUR FUTURES COURSES !

 

* Some information is compiled from public sources and believed to be reliable but is not guaranteed as to its accuracy or completeness. No responsibility is assumed for the use of this material and no express or implied warranties are made. Nothing contained herein shall be construed as an offer to buy/sell, or as a solicitation to buy/sell, any security, commodity or derivatives instrument. Instruments such as Futures, Forex, Options, and CFD trading involve a substantial risk of loss and is not suitable for all investors. Please carefully consider your financial condition prior to making any investments.