Hubert Senters here.
We’ve been getting some questions about what size of account do you need to trade bonds with? Heads up, I am not a broker. I’m not a financial advisor. I can’t give you financial advice. I can tell you the best thing you need to do is call your broker and they’ll tell you exactly how much money you need to trade.
Now, every broker are slightly different but they can’t go below the exchange minimum. So here is a slide I put together for you to answer a few of these questions. Number one, my first advice is call your broker. They’ll be able to tell you.
So depending on who your broker is if they’re a good broker or if they’re an evil broker it’s going to depend on how much they’re going to try to charge you for either Intraday margin or Over Night margin. Now, Intraday margin would be if you’re holding the trade less than 23 hours. Okay. So you’re not going to hold it Over Night.
Over Night margin will mean if you’re holding it for more than 24 hours so common fees on a lot of different brokerage firms for Intraday margin you can get it as low as $300 to $1,000. And pretty commonly is about $500. Now, some brokers charge more than others. So the exchange will set the minimum and they can charge above that if they want to but they can’t charge below it. Okay.
And then for the different products this is and the exchanges they also change depending on how volatile those products are. But I’ll show you how to find that stuff. So in the 30 year, so this will be for Intraday margin over here and then for Over Night margin if you’re going to hold it basically 24 hours or more you’re going to need $3,000 in your account.
In this example of saying $3375 on the 10 year you’re going to need about $1500 on the 5 you’re going to need about $743 on the 2 year you’re going to need $304 to hold it Over Night. But for Intraday you need a lot less money. So let me walk you through an example and why I say you should call your broker because every broker uses a slightly different rule.
And it’s really important for you to know how much money you need in order to trade these futures. So the first thing we’re going to go to the semi website because that’s the exchange that you’re going to rate the bonds on. So you can find this page pretty easy just google US Treasury bond margins. A link for the CME Group will come up and you can see it’s CBOT or CBO Exchange Chicago Board of Trade interest rates.
And don’t pay attention to the 17 that doesn’t mean anything. 30 year Treasury note bonds and you can see right here the maintenance is $2300 so you can consider that one of the margin. So there’s an initial margin and then there’s maintenance margin. So call your broker so if they’re saying it’s $2300 and you’re going ‘’okay, does that mean $2300 for initial or maintenance?’’
So, the initial margin is usually slightly more than the maintenance margin. So let me walk through another example for you. So they’re saying $2300 for maintenance margin. So we go from there and I’ve pulled up trade stations rates just from their quote page and you can see here the 30 year T-bond. I will scroll up, zoom, you can see right here.
This is the initial margin, that’s the maintenance margin and that’s the date trading range, I’m going to scroll back down here. That’s why I say call your broker. It’s a lot easier than trying to figure it out yourself. Their initial margin for a 30 year bond for them is going to be $2530. The maintenance in other words to hold the sucker Over Night is $2300. Okay. The 50 percent of the initial would be the Intraday margin. So what you do is you’d take $2330 times 50 percent and that would come up with the fee that you’d pay for an Intraday margin.
Like I said it’s way easier to just call your broker and ask them what what’s what. So here you can see that’s the 30 year. Here’s the 10 year $1100. Here’s the 5year $704. There’s the 2 year $450 so my numbers are slightly off but it’s just because I’m using slightly older data and I’m actually giving you a higher quote so you’ll be surprised when you call your broker if it’s lower.
So once again if you don’t know how much money you need for either Intraday margin or Over Night margin just pick up the phone call your broker. They should know all these details and they’ll tell you what is required for them. Now, there are some brokers that are better than others as far as cost and hopefully you’ve got a good one and not a bad one.
Good luck. Hope it helps. And I’ll see you on the next video.
Hubert.
