Author Archives: Claudia Soria

A margin call is made when the amount of money (stocks or bonds) in an investor’s account drops below the maintenance margin required. The investor must deposit enough cash or securities in order to bring the account to initial margin … Continue reading →

Maintenance margin, also known as minimum margin, is the lowest level to which an investor’s account can drop before additional funds are required. Maintenance margin requirements are determined by the board of directors of an exchange and are based on … Continue reading →

Initial margin is the minimum amount required to open a futures position. Initial margin requirements are determined by the board of directors of an exchange and are based on the volatility and price of the futures contract.

Margin is the amount of money (or sometimes stocks or bonds) an exchange requires an investor to have on deposit in an account in order to open and maintain positions in futures contracts. That amount of money will cover, at … Continue reading →

At expiration of a futures contract, cash prices and futures prices tend to converge (the basis approaches zero).

A long hedger is someone that will need to buy a commodity in the future and protects its futures cost by buying futures. A long hedger benefits from a weakening basis.

A short hedger owns a commodity and protects its futures sales price by selling futures. A short hedger benefits from a strengthening basis.

A weakening basis occurs when the difference between the cash market price of a given commodity and the futures price of the same commodity widens. This happens when the cash market price increases more slowly relative to the futures price … Continue reading →

A strengthening basis occurs when the difference between the cash market price of a given commodity and the futures price of the same commodity narrows. This happens when the cash market price increases relative to the futures price. The basis … Continue reading →

Basis is the difference between the local cash price of a commodity and the price of a specific futures contract of the same commodity at any given time. The price difference represents the costs to carry. A negative basis (cash … Continue reading →