As a company administrator, use the settings on the Accounts | SOD/Credit tab to:
The Setup application calculates "available credit" for an account based on your settings. The Daily Limit setting represents a daily starting credit limit, but "available credit" is calculated by adding profits, subtracting losses, and/or subtracting product margin from the starting limit depending on what settings you choose for the account. Credit check is enabled in the Credit Settings section.
Note: Credit limits are applied in aggregate to an account with sub-accounts.
When checking risk limits by credit, TT software uses the following parameters to determine if an order should be accepted or rejected:
Apply P/L & Margin — If margin and P/L are both included in the credit check per trading session, then available credit = daily credit +/- P/L - margin. Select this option as a balance if credit is updated daily in one of two ways: Manually by your firm, or automatically marking-to-market by adding yesterday's P/L to today's credit and representing yesterday’s position at the settlement price.
Upon entering an order, margin is calculated on a worst-case basis, applying outright margin to working uneven spreads, outright orders, and worst-case outright positions. Spread/strategy margin is applied to working even spreads and synthetic spread positions (e.g., a 1-lot long position in Sep 16 and a 1-lot short position in Dec 16 only requires one times the current spread margin value). If a new order would cause available credit to drop at or below zero, then the order is rejected unless the only possible result of the order being filled would be to reduce the position in all affected contracts without increasing the gross or net position of any products (requires Trade out allowed enabled).
TT uses the following formulas to calculate the total Margin for a product using Intra-Product Spread Margining:
Note: These calculations also apply to Options and Strategy Margins.
TT uses the following formula to calculate available credit for users:
Credit +/- Overall P&L - Future Margin Required - Synthetic Spread Margin Required - Spread Margin Required = Available
Credit
If an account’s available credit is less than zero, the account is not allowed to be used for trading.
An account has the following risk limits:
Question: Can the account be used to buy 3 Futures contracts?
Result: Available Credit is greater than zero (0), so the order is accepted.
Assume the previous order was filled and the current Jun ES position is long 3. Now the trader wants to use the account to buy one (1) JUN-SEP ES exchange-traded spread:
Question: Can the account be used to buy 1 JUN-SEP ES spread?
Result: Available Credit is less than zero (0), so the order is rejected.
Margin is the amount of money that is required by the company to hold a position. Margin requirements are set by the exchange and differ by product. The risk manager (company administrator in TT) can set margin limits per product or upload product margin CSV files for your company based on exchange requirements.
Applied Margin allows risk managers to increase or decrease margin requirements when calculating risk limits for traders, and can be set on Accounts | Limits tab in Setup.
For example, the margin for a particular product is 4000 USD and a trader's applied margin percentge increaase/decrease has been set as = 50
Applied Margin Percentage is... | Margin * Applied Margin = Total Margin |
---|---|
+100 | $4,000 total margin required when placing a 1-lot order |
50% | $4,000 *50% = $2000 total margin required when placing a 1-lot order. |
0 % | $4,000 * 0 = $0 total margin required when placing a 1-lot order |
200% | $4,000 *200% = $8000 total margin required when placing a 1-lot order. |
An account has the following risk limits:
Question: Can the account be used to buy 3 Futures contracts?
Calculation:
Result: Available Credit is less than zero (0), so the order is rejected.
An account has the following risk limits and no positions:
Question: Can the account be used to sell 100 Futures contracts?
Calculation:
Result: Available Credit is greater than zero (0), so the order is accepted.
A trader has the following risk limits and position:
The trader has bought 5 MAR Futures, sold 12 JUN Futures, and bought 10 MAR-JUN exchange-traded spreads:
Contract Month | Long | Short | Position |
---|---|---|---|
MAR | 15 | 0 | Long 15 |
JUN | 0 | 22 | Short 22 |
MAR + JUN |
15 | 22 |
Short 7 |
Question: Can the trader sell 1 JUN Future?
Result: Available Credit is greater than zero (0), so the order is accepted.