I was looking at my Robinhood app thinking of buying oil futures. it says the “margin requirement” is $24,107. Does that mean I have to have $24,107 in the account place an order? I’ve never traded any kind of commodity before.
What does “margin” on an oil contract mean?
byu/Plastic-Injury8856 inoil
Posted by Plastic-Injury8856
10 Comments
Yes, and you can lose more than $24,107.
You can trade micro futures instead which is 10x less, so $2.x k usd.
You can lose more than your initial capital, that’s why it’s called a margin requirement.
If you buy micro futures for crude at $100 and it goes to $101, you make $100. If it goes to $110, you make $1000.
If it drops from $100 to $80, you lose $2000.
You can also enter a short position by selling directly, and buying (covering) back.
Hope this was a helpful look at how commodity trading works.
Note: this is like options gambling but 23 hours a day on steroids. You can easily get margin called if you go full portfolio, and Trump signs a peace deal, and you might owe Robinhood some money. Try to understand the risks before playing the game. Good luck bro, I almost got margin called on Monday, but held steady and made all my losses and profits back by Friday, this is not for the faint of heart
Also if you’re on Robinhood sometimes your futures equity don’t clear until the next day, but it’ll show up on your main portfolio page, just not your total summary of all portfolios if you have multiple accounts on Robinhood, so don’t freak out. A few years ago some guy offed himself because he thought he lost more money than he did on Robinhood trading futures
Please, please, please do not trade oil futures if you do not have a solid grasp of how futures trading works.
Especially now, you can end up with your account liquidated in minutes if you are not careful.
Put the app down and step away.
It means you’re either borrowing money or oil for the trade. Since RH knows you have no storage tanks you’re borrowing money disguised as oil and they will margin call your ass. It’s all paper, it’s a big game and you get the news days after what just happened was planned.
Look at the micro contact and get familiar with that one before trading the full sized contract! Much less margin required.
Do not trade futures.
Just walk away
Yea F that. You’re nuts touching futs and anything leveraged with this level of unpredictability and heavy handed manipulation. What ever happened to good old fashioned equities? Why are there so many kamikaze traders out here right now in everything from sports gambling to bitcoin ready to send themselves to the breadlines.. I really don’t get it.
Stick with leveraged ETFs
In addition to all the other comments here: if you’re a naïve investor and you think an investment is a sure thing, I suggest going the extra step of explaining to yourself why you’re so much smarter than experienced investors who can trade on the same information.