Iiroc forex margin requirements for options

Not all securities can be bought on margin. Buying on margin is a double-edged sword that can translate into bigger gains or bigger losses. In volatile markets, investors who borrowed from their brokers may need to provide additional cash if the price of a stock drops too much for those who bought on margin or rallies too much for those who shorted a stock.

In such cases, brokers are also allowed to liquidate a position, even without informing the investor. Real-time position monitoring is a crucial tool when buying on margin or shorting a stock. Commodities Margin Definition Commodities margin is the amount of equity contributed by an investor to support a futures contract.

SPAN Standard Portfolio Analysis of Risk evaluates overall portfolio risk by calculating the worst possible loss that a portfolio of derivative and physical instruments might reasonably incur over a specified time period typically one trading day. This is done by computing the gains and losses that the portfolio would incur under different market conditions.

The most important part of the SPAN methodology is the SPAN risk array, a set of numeric values that indicate how a particular contract will gain or lose value under various conditions. Each condition is called a risk scenario.

The numeric value for each risk scenario represents the gain or loss that that particular contract will experience for a particular combination of price or underlying price change, volatility change, and decrease in time to expiration. Commodities Initial and Maintenance Margin Just like securities, commodities have required initial and maintenance margins.

These are typically set by the individual exchanges as a percentage of the current value of a futures contract, based on the volatility and price of the contract. The initial margin requirement for a futures contract is the amount of money you must put up as collateral to open position on the contract. To be able to buy a futures contract, you must meet the initial margin requirement, which means that you must deposit or already have that amount of money in your account.

Maintenance margin for commodities is the amount that you must maintain in your account to support the futures contract and represents the lowest level to which your account can drop before you must deposit additional funds. Commodities positions are marked to market daily, with your account adjusted for any profit or loss that occurs. Because the price of underlying commodities fluctuates, it is possible that the value of the commodity may decline to the point at which your account balance falls below the required maintenance margin.

If this happens, brokers typically make a margin call, which means you must deposit additional funds to meet the margin requirement. Real-Time Margining We use real-time margining to allow you to see your trading risk at any moment of the day. Our real-time margin system applies margin requirements throughout the day to new trades and trades already on the books and enforces initial margin requirements at the end of the day, with real-time liquidation of positions instead of delayed margin calls.

This system allows us to maintain our low commissions because we do not have to spread the cost of credit losses to customers in the form of higher costs. The Account Window in Trader Workstation demo or customer account shows your margin requirements at any time. Whether you have assets in a securities account or in a futures account, your assets are protected by U.

In the futures account, your assets are protected by CFTC rules requiring segregation of customer funds. You are also protected by our strong financial position and our conservative risk management philosophy. As part of the Integrated Investment Account service, we are authorized to automatically transfer funds as necessary between your securities account and your futures account in order to satisfy margin requirements in either account.

You can configure how you want us to handle the transfer of excess funds between accounts on the Excess Funds Sweep page in Account Management: you can choose to sweep funds to the securities account, to the futures account, or you can choose to not sweep excess funds at all.

Margin Calculation Basis Available Products Rule-Based Margin System: Predefined and static calculations are applied to each position or predefined groups of positions "strategies". Margin accounts: US stocks, index options, stock options, single stock futures, and mutual funds. All accounts: Forex; bonds; Canadian, European, and Asian stocks; and Canadian stock options and index options.

Risk-Based Margin System: Exchanges consider the maximum one day risk on all the positions in a complete portfolio, or subportfolio together for example, a future and all the options delivering that future. Portfolio Margin accounts: US stocks, index options, stock options, single stock futures, and mutual funds. All accounts: All futures and future options in any account. Margin requirements for each underlying are listed on the appropriate exchange site for the contract.

Such systems are less comprehensive when considering large moves in the price of the underlying stock or future. This 'Extreme Margin Model' may increase the margin requirement for portfolios with net short options positions, and is particularly sensitive to short positions in far out-of-the-money options. We also apply a concentrated margining requirement to Margin accounts.

If the concentrated margining requirement exceeds that of the standard rules based margin required, then the newly calculated concentrated margin requirement will be applied to the account. If you sell a security short, you must have sufficient equity in your account to cover any fees associated with borrowing the security.

If you borrow the security through us, we will borrow the security on your behalf and your account must have sufficient collateral to cover the margin requirements of the short sale. In instances in which the security shorted is hard to borrow, borrowing fees charged by the lender may be so high greater than the interest earned that the short seller must pay additional interest for the privilege of borrowing a security.

Customers may view the indicative short stock interest rates for a specific stock through the Short Stock SLB Availability tool located in the Tools section of their Account Management page. For more information concerning shorting stocks and associated fees, visit our Stock Shorting page. Limited is also subject to substantially higher margin requirements than in a non-SIPP account.

In the interest of ensuring the continued safety of its clients, the broker may modify certain margin policies to adjust for unprecedented volatility in financial markets. The changes will promote reduction of leverage in client portfolios and help ensure that clients' accounts are appropriately capitalized.

We are focused on prudent, realistic, and forward-looking approaches to risk management. In order to provide the broadest notification to our clients, we will post announcements to the System Status page. Stage 2 will include proposed amendments to current leverage rules and margin requirements but will be published for public comment at a later date. Of note, IIROC enjoys a unique structure as it regularly updates FX margin trading requirements subject to FX Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period.

Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.

High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction. All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair.

Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.

In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Read this Term. Firstly, the regulator has updated its derivatives-related definitions, which will no longer be restricted to futures and options contracts.

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