Futures Trading Risk Management
Customers with Margin Trading account may choose to open a Futures trading account with uSMART. Futures account is a separate account from Securities trading and Customer shall monitor and manage the risk of the accounts individually.
Buying Power
A customer may be allowed to open positions based on the equity available in the futures account. To open a position, the account equity must be equal to or greater than the required initial margin.
Example 1:
Customer has USD 10,000 and enters a position that requires an initial margin of USD 5,000.
Cash Balance: USD 10,000
Profit and Loss: 0
Equity: USD 10,000
Initial Margin: 5,000
10,000 – 5,000 > 0
Customer will be able to open the position.
Example 2：
Assume that the customer has an unrealised loss of USD 1,000 and wishes to open another position that requires an initial margin of USD 4,500.
Cash Balance: USD 10,000
Profit and Loss: - USD 1,000
Equity: 10,000 – 1,000 = USD 9,000
Initial Margin: 5,000 + 4,500 = 9,500
9,000 – 9,500 < 0
Customer will NOT be able to open the additional position.
Margin Call and Force Liquidation：
High margin risk alert notification may be sent to customer if initial margin of the open positions is higher than the equity in the account.
Example 1:
Customer has USD 5,000 and entered a position that requires an initial margin of USD 4,500.
Assume customer has unrealised loss of USD 600.
Cash Balance: USD 5,000
Profit and Loss: - USD 600
Equity: 5,000 – 600 = USD 4,400
Initial Margin: 4,500
Initial Margin / Equity = 4,500 / 4,400 = 102.27%
The customer may receive a high margin risk alert. A position may be subject to forced liquidation if the Initial Margin / Equity ratio exceeds 110%.
When the risk level of an account increases, the client may receive relevant risk alerts. If the account equity is insufficient to meet the applicable margin requirements of the Company, the exchange or the clearing house from time to time, the Company shall have the right to take risk control measures in respect of the relevant positions without prior notice, including but not limited to restricting the opening of new positions, requiring additional margin, or liquidating positions. The actual arrangements shall be subject to the Company's then applicable risk management policies and system processing. The above example is for illustrative purposes only. Whether a client is able to open a position in practice may also be subject to factors such as product risk parameters, contract months, market conditions, trading hours, system settings, and the Company's risk control requirements as applicable from time to time.
The information on this page is for general reference only and does not constitute any offer, solicitation, recommendation or investment advice. Futures contracts are leveraged products involving significant risks and are not suitable for all investors. The Company may adjust the applicable fees, margin requirements, risk controls, available products and service arrangements from time to time without prior notice. Actual arrangements are subject to the trading platform display, the client's account status and the Company's final determination.
