Trading US Treasury Futures-when is cash exchanged?

RoniNYC · December 1st, 2012, 2:34 am

Hi,Say I trade only using daily settlement prices, say the price today is 100 points on the 5yr US Treasury Future Note. How much will I need to pay now to own 1 contract? do I pay 100 bucks? or maybe 100*1000= 100,000? or even the difference between the face and the current price of the contract? I'm a little confused here :\Thanks.

daveangel · December 1st, 2012, 9:52 am

you do not need to pay anything. you will be required to post an initial margin and then variation margin for mark to market.

RoniNYC · December 1st, 2012, 4:51 pm

QuoteOriginally posted by: daveangelyou do not need to pay anything. you will be required to post an initial margin and then variation margin for mark to market.Oh okay, got it... it makes sense to me now...Let me ask a follow up question, I enter a position, I need to pay $X transaction costs, right?Do I need to pay the same amount of transaction costs when I close the position? say the spread and everything stays constant. Thanks.

bearish · December 1st, 2012, 5:02 pm

If you think in terms of marking your position to a mid price, then you pay half the bid/ask spread in transaction cost when you enter and half when you exit. Additionally, you will probably pay a broker commission on each transaction.

RoniNYC · December 1st, 2012, 7:11 pm

QuoteOriginally posted by: bearishIf you think in terms of marking your position to a mid price, then you pay half the bid/ask spread in transaction cost when you enter and half when you exit. Additionally, you will probably pay a broker commission on each transaction.Got it, thanks for your help