Commodity Futures 101: Learn How to Trade Commodity Futures
Ken Trester, April 17, 2009
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Futures and Margin
When the price of a contract changes, you may find yourself with too much or too little margin deposit. If the price rises, traders with short positions must increase their deposits. If the price falls, traders with long positions must add to their accounts. In both cases, traders will receive a "margin call" from their broker ordering them to deposit enough money to bring their account balance back to a "maintenance" level. If they do not respond immediately, a broker will liquidate their position.
When you buy options on a futures contract, there are no margin requirements. Like stock or index options, you can't lose more than your initial investment. However, if you write options on futures or if you implement any kind of spread strategies, you may be subject to margin restrictions.
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