Tuesday, December 20, 2011

How we can finance margin in commodity futures trading?

Actually, since they are futures and there is no settlement until the contract comes due, there is no financing required other than the initial margin requirement which is more of a security for the broker that you will pay for any losses incurred. If the security is deposited in the form of t-bills, then you can actually earn interest on the deposit. If the balance falls to a position requiring more margin and you do not provide the margin, he just closes your positions and liquidates the account. Nothing could be more simple.

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