TRADING TIPS

Why Do They Raise the Minimums?

Hubert Senters here. Had a question from the viewer. Why it’s more expensive to trade bonds right now? Here’s how it works. When you sign those trading documents that everybody’s signs and none of us read myself included. When we do that we are allowing the brokerage firms to set the — there’s minimum intra-day margins and there’s minimum overnight margins set by the exchange. Those are the minimums. Your brokerage firms can charge higher rates than that so that’s why they do it. And the reason that they do it is to protect their self from each other. So let’s say I’m in a bond position. I’m going to use this as an example. I’ve got a $100,000 contracts of the 30-year bond but I’ve only got enough money in my account trade a $100. They’ll reject the order but on futures you can actually leverage up four times. So you have $25,000 account. You can trade a $100,000.  And you can trade it million times a day. They don’t care how many round turns you make. They just want to make sure you don’t go upside down in your position. So what they do is when the volatility and the ranges of things are wider. When the market volatility is wider what they’ll do is sometimes the exchange will raise their intra-day and overnight margins. And also brokerage firms will pack on more to that too. Just to keep everybody from hurting each other. That’s how it works.  That’s why it doesn’t and they’ll do it on several different contracts. So includes going crazy the exchange will increase the minimum, intra-day margin and overnight margin. And then also the brokerage firms will also increase that. It happens on every single of inch amount there. If it goes nuts the exchange could potentially shut down. Circuit breakouts and all that good stuff but when we just have volatility that’s through the roof and there’s a lot of uncertainty they’ll usually as a just a precautionary thing Increase the intra-day margins, the overnight margins and then the brokerage firms has the right to increase their minimums. They almost always higher than the minimums of the exchange recommends just they’ll have a larger margin of air. I’m going to be doing a special webinar tonight on how to invest in start-ups and how to become an angel investor. We’ll walk you through that tonight at 8PM EST. I will HYPERLINK you to the registration form. If you’re interested in investing companies like Uber, Slack, Facebook, Google and stuff like that. Before it’s a public company. Would you like to invest in a private company before that? You’re not going to be able to invest in them now. Like you’re not going to be able to invest in Apple, Facebook, Uber, Slack. They’re already in the public markets. You’ll be looking for the new fresh. The next Amazon, the next Google, the next Facebook that’s what you’re trying to do when you do this stuff. I’m going to walk you through that tonight. I’ll HYPERLINK you to the registration form. Good luck. Hope it helps. See you on the next video. Hubert.

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