Maintenance margin for commodities is the amount that you must maintain in your account to support the futures contract and represents the lowest level to which your account can drop before you must deposit additional funds. Commodities positions are marked to market daily, with your account adjusted for any profit or loss that occurs. Because the price of underlying commodities fluctuates, it is possible that the value of the commodity may decline to the point at which your account balance falls below the required maintenance margin. If this happens, brokers typically make a margin call, which means you must deposit additional funds to meet the margin requirement.
Let’s cover this with an example. If you have $1,000 in your trading account and use a leverage of 1:100 you could theoretically open a position size of $100,000. However, by doing so, your entire trading account would be allocated as the required margin for the trade, and even a single price tick against you would lead to a margin call. There would be no free margin to withstand any negative price fluctuation.
If you sell a security short, you must have sufficient equity in your account to cover any fees associated with borrowing the security. If you borrow the security through us, we will borrow the security on your behalf and your account must have sufficient collateral to cover the margin requirements of the short sale. To cover administrative fees and stock borrowing fees, we must post 102% of the value of the security borrowed as collateral with the lender. In instances in which the security shorted is hard to borrow, borrowing fees charged by the lender may be so high (greater than the interest earned) that the short seller must pay additional interest for the privilege of borrowing a security. Customers may view the indicative short stock interest rates for a specific stock through the Short Stock (SLB) Availability tool located in the Tools section of their Account Management page. For more information concerning shorting stocks and associated fees, visit our Stock Shorting page.