"Due To Market Volatility", Tradestation Requires Full Margin On All Overnight Futures Trading

Despite the last two days of exuberant buying and resumption of the melt-up, it seems there are more than a few holes in investors' trading accounts that brokerages are trying to deal with.

In what appears to be an escalation from last week's margin department tensions, TradeStation Securities has suspended all Overnight Reduced Margin Rates for a number of US equity futures contracts, demanding Full Margin be allocated...


This could mean a dramatic increase in required margin dollars for some (it would seem day-trading margins are just 25% of initial margins - not unusual - and so that's quite a bump)...

We suspect TradeStation will not be the last to do this.


lookslikecraptome Quantify Mon, 02/12/2018 - 23:39 Permalink

They call it day trading for a reason. Start over every day. Be flat at the end of the trading day. Not always a bad Idea. Depending who is out to eat your lunch (everybody), volatility is good or bad. As is being short or long. I used trade station in the past with widows 3.1 and more recent os. I understand why they are doing what they are doing. Especially in this day and age. Overnight exposure can be really bad. Are you going to monitor your positions 24 hours a day? 

In reply to by Quantify

Al Huxley serotonindumptruck Mon, 02/12/2018 - 17:39 Permalink

Margin call is one of 2 things


  • when market makers are on the right side of a trade and they squeeze the other side to force the trade even harder in their direction 
  • when market makers get caught on the wrong side of the trade and they need to kill the successful other side, so they increase margin requirements to kill the momentum of the trade that's going against them

In reply to by serotonindumptruck

Mycroft Holmes IV serotonindumptruck Mon, 02/12/2018 - 18:00 Permalink

Futures are usually bought on the margin, meaning only a percentage of the total value of the position needs to be put into a “margin account” with the trader’s clearing house. Thus, when buying 1 lot of Sweet Crude (10k barrels per lot @ $60), the trader doesn’t need $60k in his account, just $6k (assuming a 10% margin requirement).

Further, if the position moves against said trader, the difference in price needs to be deposited by end of day or else the clearing house liquidates the position.

By raising margins to 100%, you are effectively forcing traders to only take risk they can afford, and by virtue, reduce the overall volume carried overnight.

In reply to by serotonindumptruck

107cicero serotonindumptruck Mon, 02/12/2018 - 19:12 Permalink

Brokerages will give you credit for your account on certain stocks or commodities.  Approved stocks, stocks that are over $5 and on a decent exchange they will lend you up to  50% of the price of your marginable stock.

For retail accounts not market makers if you bought say Amazon at a thousand dollars a share for 10 shares the brokerage would lend you up to $5,000 , 50% of the stock's current value, at an interest rate say 4%.  However, if Amazon drops to to $900 bucks the next day the value of your ten share is $9k so the you are over your margin by $500 bucks.

The margin call is when the broker calls you up  and asks for the $500 to bring you up to 50%.  if you don't pay it that day or you duck him (its always a 'him')they will sell your stock up to what you owe.  its called a sell out.

Hope that helps.

In reply to by serotonindumptruck

Ink Pusher Mon, 02/12/2018 - 17:26 Permalink

"We suspect TradeStation will not be the last to do this."

The understatement of the year considering that the bloodbath of the decade has just begun...

Jtrillian Mon, 02/12/2018 - 17:26 Permalink

Changing margin requirements is essentially the same thing as a margin call.  This is going to force a lot of people out of positions. 


california chrome Mon, 02/12/2018 - 17:26 Permalink

If folks don't flatten their positions at the close and reposition again 15 minutes later when the markets reopen and daily margin rates kick in they are wallowing in mucho cash and don't care. Plus the TS monthly fees don't deter them or they'd use the NT platform.


Mr. Ed Mon, 02/12/2018 - 17:30 Permalink

The current level of volatility doesn't justify the change in daytrading margin and I don't think others will follow. It does suggest that Tradestation is having some systemic problems (technical or financial).

Weren't they the ones who cut access to their platform last week?

I'm really glad now that I decided not to open an extra account with them.

Jtrillian Mon, 02/12/2018 - 17:47 Permalink

People need to understand there is a difference between trading on margin and being over-leveraged.  They are not the same thing at all. 

Trading on margin can be a good thing.  Let's say you want to buy 100 shares of XYZ stock at 100 dollars and your stop loss is 1 dollar away from your entry at 99 dollars.  You are only risking 100 dollars essentially (not completely true if there is a halt or the market goes down or overnight activity slams it but you get the idea).  If you do not trade on margin, you will need at least $10,000 to make that trade (100 dollars X 100 shares).  That's a lot of money when you are only really risking $100. 

That is the beauty of margin.  It allows you to do more with your money as it only requires a percentage of the total cost to take a position.  Your stop loss should always be way under your margin requirements.  If not, it's just a matter of time before you get a margin call.

The fundamental difference between being over-leveraged and trading on margin is this... Over-leveraged means you are getting underwater in your account.  It means you've risked too much and haven't stuck to your stops.  It means your account is at risk of being wiped out.  It means that your losses are so large that it takes you 10X longer just to get back to even or causes you to close your account completely.  The general rule of thumb to prevent being over-leveraged is never to risk more than 2-3% of your total account at any one time.   If you lose more than this on any given trade, it can take you a long time to recover... if ever. 

You can be over-leveraged with NO MARGIN and you can be responsible trading on margin.  Unfortunately, most people do get over-leveraged because most folks are idiots and gamblers and have no clue with regard to these basic trading concepts.