1. Futures account risk rate, margin call and forced liquidation
Since it is margin trading, investors may incur risks due to insufficient margin. In order to intuitively represent the risk status of customer accounts, futures companies generally use risk rates to express the risk status of investor accounts.
Risk rate = position margin/customer equity (equity is all funds in the account)
That is to say, when the customer has no positions, the account risk rate is zero: and when the margin required to maintain the position exceeds the total funds in the customer's account, the risk rate is greater than 100%, which means that the fund balance is negative, and it also means that the margin is insufficient. .
When the margin is insufficient, the futures company will notify the account owner to make up the margin gap in a timely manner, which is called a margin call. If the account owner fails to top up the margin in time, according to regulations, the futures company has the right to implement partial or all forced liquidation of the account positions until the account risk is lower than 100%
[Example] A customer's account originally had assets of 500,000 yuan. One morning, the customer opened a position and bought 5 lots of CSI 30 stock index futures contracts for that month when the index was 2200 points. In the afternoon, the index continued to fall, but the trader did not close the position. The settlement price on the day is 2150 points. Assuming that the trading margin ratio is 15% and the handling fee is 10,000 per lot per side, the customer's account situation is:
The account capital situation when the stock index futures fell to 2150 points
Occupied margin: 2150x 300x5x 15%= 483750 yuan
Profit and loss: (2150- -2200) x300x5=-75000 yuan
Total equity of futures account: 499670-75000=424670 yuan
Fund balance (i.e. available funds): 424670-483750=-59080 yuan
It can be seen that although the customer account funds are still positive, the total account equity is less than the position margin, resulting in a negative fund balance (i.e., available funds).
Obviously, to maintain a long position of 5 lots, the customer needs to add a margin call of at least 59,080 yuan. If the customer fails to replenish the margin within the specified time, the futures company can implement partial forced liquidation of his position. After calculation, the maximum number of positions that can be retained with an equity of 424,670 yuan is
424670/2150/300/15%= 4.39 lots. Therefore, the futures company can at least liquidate its position by one lot.
2. Choose a variety that suits you
After you have a preliminary understanding of futures trading, choosing a trading variety that suits you can help you get started with futures trading faster. We suggest that you can make your selection based on multiple dimensions such as the degree of understanding of relevant products in the current futures market, contract size, volatility, and liquidity.
Familiarity
The first principle when choosing a futures product is your familiarity with the trading product. Generally speaking, people in the financial industry prefer to trade stock index futures. Steel traders often trade rebar, hot coils, etc. Choose one that is related to the industry you are engaged in, or that you have in-depth knowledge of.