Trader Mindset How to lower your overnight margin
Jul 18, 2024
Discover effective strategies for managing overnight trading risks, particularly for smaller accounts. Learn how to leverage spreads between stocks like NVIDIA and AMD, along with futures trading, to maintain financial stability. Gain insights into recognizing personal financial boundaries and assessing risk tolerance while trading overnight. The discussion also emphasizes the importance of smaller positions or pauses in trading for better alignment with your financial situation.
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Use Spreads to Lower Overnight Margin
- Use spreads to take risk home overnight and significantly reduce margin requirements.
- Manage risk by being simultaneously long and short correlated instruments instead of just directional trades.
Example: NVIDIA vs AMD Spread
- Michael Martin uses an example spread between NVIDIA and AMD to explain risk reduction.
- Buying one chip stock and selling another can reduce volatility exposure and margin needs.
Trade Futures Spreads for Margin Discount
- Trade intra-commodity futures spreads like buying a near month and selling a deferred month to reduce margin.
- Such spreads often receive a 70% to 90% margin discount due to offsetting risk.