Capital and Portfolio Risk · Futures Trading Guide
A sound plan must survive a cash demand, not just a chart drawdown. Stress tests combine price losses, changed collateral requirements and impaired exits.
Separate a loss from collateral
Variation losses reduce account equity. Initial or maintenance margin is collateral required to support an open position, not an additional trading expense by itself. A requirement increase can create a cash shortage without appearing as a profit and loss charge. Model both effects, but do not subtract the same collateral twice from equity.
Work through a funding scenario
Assume an account has $20,000 of equity and needs $8,000 of collateral for its position. A stressed price move causes a $6,000 loss, leaving $14,000 equity. If the required collateral then rises to $15,000, the account has a $1,000 shortfall before any extra reserve. Subtracting the original $8,000 again would misstate the result. Broker procedures and timing determine the actual response required.
Make the scenario harder than yesterday
Test a gap larger than the planned stop, multiple adverse sessions, loss of a spread offset and a blocked exit during a limit move. Add currency and collateral haircuts where relevant. Stress simultaneous losses across correlated positions rather than assuming every hedge pays immediately. Include how long a cash transfer would actually take.
Define actions before the shortfall
Specify which exposures can be reduced, how outstanding orders are cancelled and what backup access is available. Cash held outside the broker is not automatically available for an immediate margin call. A stress model is incomplete if it assumes a timely exit at a price that could be unavailable. Review scenarios when volatility, contract terms or portfolio concentration changes.
Try it yourself
Equity is $12,000. A $3,000 loss occurs and required collateral rises to $10,000. What is the resulting shortfall?
Show the worked answer
Equity falls to $9,000, leaving a $1,000 shortfall against the $10,000 requirement, before additional reserves.
Further reading
- CME Group: Daily settlement
- CME Group: Position and risk management
- CME Group: Price limits and price banding
Educational material. Prices, margins and strategy examples are hypothetical unless explicitly identified as contract specifications. They are not trade recommendations. Futures losses can exceed deposited collateral. Product terms and eligibility vary by venue and jurisdiction.
