Bob:
> > > I would say the opposite. Most pork belly futures contract owners do
> > > have the financial capability to take delivery. Say a single contract
> > > is worth USD 100,000. And the owner put down 5% to buy it. Where did
> > > the other USD 95,000 come from? The broker loaned it to the owner.
> > > Ya think the broker just goes around loaning those amounts to anybody?
> > > No. The owner of the contract had to put up collateral for the $95,000
Lyris buster
> > The broker doesn't loan anybody anything!
>
> You are right in a lot of cases. I was wrong about that.
> Technically a loan isn't made. However, if things go wrong
> for you, you owe. If you don't have the wealth required,
> you're in deep dodo. They're going after your assets.
Actually, they simply monitor your account equity. In the
'old' days, this was done with the daily equity run. Today,
it's real time. (damn computers).
If you get into maintenance margin (usually 75% of initial
margin), they give you a phone call. Either you wire money,
else close the position. Nothing new or different here. Been
done this way since the days of Jesse Livermore.
> Financially healthy futures brokers don't open accounts
> with just anybody.
Maybe not 'just anybody', but 'just about anybody'.
> I guess what they're doing now a days is watching your account
> like a hawk and not hesitating to take control of it. But if
> they can't bail you out, you owe.
They liquidate before it comes to that. See above.
> I hope you're in the 5% that make it.
I'm still here. (major grin ;)
Hans.
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