What is commodity margin?

Commodity margin concerns the initial amount of money that needs to be saved to open an account for business brokerage for commodities. Many exchanges around the world are traded with commodity futures. In the Futures contract, the buyer and the seller agree on the date of delivery of the commission, its price and quantity to be delivered. Most commodities' positions are settled before the contractual delivery date. This can be achieved on the other side, whether it buys or sells, from the original transaction before the date of expiry of the futures contract. The replacement for which the futures is traded requires the customer to make the initial contribution of good faith in the transaction. This amount, called the initial commodity margin, is a specified percentage-a 2-15%-a full value of the futures contract.

Since futures contracts are transactions for the purchase or sale of specific commodities, any changes in the market price of those komit, which occur between the transaction and the settlement date - caused by the factors of supply and demand, catastrophic weather or political development - may have a significant impact on the price of futures contract. In addition to the initial amount of the margin, this requires the exchange of commodities to keep the customer their own capital in their account for a specified percentage of the market value of commodity positions held on the account.

If the price of the basic commodity falls to the point where the capital is on the merchant's account below the required margin maintenance level, commodities will require the customer to insert sufficient additional funds to increase the value to the specified percentage. The customer can also satisfy a commodity margin by selling some of the futures contracts in their account to get cash. It can also achieve this by saving a sufficient acceptable collateral in the account, such as the United States cash bonds.

margin requirements in accounts storeThe commodities are determined by different stock exchanges on which commodities are traded. In addition, business companies for commodity may have requirements for margins that exceed the minimum exchanges of commodities. If the Exchange expects a period of volatility on the markets, it can increase the required level of maintenance and edges. Information on the requirements for commodity margin can be obtained by consulting a commodity brokerage company.