Futures Trading Account Value

All futures contracts are settled daily and assigned a final value price. Based on this settlement price, the value of all positions are "marked-to-the-market" each day after the official close; your account is either debited or credited based on how well your positions fared in that day's trading session. As long as your position(s) remains open, cash will either come into your account or leave your account based on the change in the settlement price from day to day.

This system gives futures trading a rock-solid reputation for credit-worthiness because losses are not allowed to accumulate without some response being required. It is this mechanism that brings integrity to the marketplace.

Or considered another way, every trader can have confidence knowing that the other side of his trade will be made good. Clearing member firms at the clearinghouse, and ultimately the futures exchanges themselves, guarantee that each trade will be honored. So as a trader, you need never give thought to the guy on the other side of your trade.

So, if your account falls below the maintenance margin level as described above, your broker will contact you for additional funds to replenish it to the initial margin level. On the other hand, if your position generates a gain, you can withdraw any excess funds (those funds above the required initial margin) or even use them to fund additional trades.

Useful Links

• Financial Safeguards by CME Clearing
• Definition of Basic Futures Terms - A Quick Reference by Lind-Waldock