A summary account statement looks like this:

Cash in margin account: $15,000

Initial margin requirement: ($2,700)

Profit (loss) on futures position: ($350)

Excess margin: $11,950

The next day, August gold futures rally sharply to settle at $388.25 per ounce. The trader now has a net profit on his futures position of $2.75 per ounce, or $550 in total. In addition, the margin required is now only the maintenance margin, which is less than the initial margin, and is equal to, say, $900 per contract for Nymex gold futures. (Initial margin is required only on the day of the futures transaction. For all other days, equity must only be above the maintenance margin requirement.) Excess margin is now $13,750. A summary account statement looks like this:

Cash in margin account: $15,000

Maintenance margin requirement: ($1,800)

Profit (loss) on futures position: $550

Excess margin: $13,750

Gold futures continue to rally and the trader closes out his position by selling two August Nymex gold futures at $392.75. A summary account statement looks like this (not including commission and other fees which are also deducted from the account):

Cash in margin account: $15,000

Maintenance margin requirement: $0

Profit (loss) on futures position: $1,450

Excess margin: $16,450

If, at the end of any trading day, there is insufficient margin in the account to meet the maintenance margin requirement for the aggregate futures position (in other words, if at any time the excess margin drops to below zero), then the trader will receive a margin call to deposit additional funds necessary to bring the equity in the account up to the level of initial margin required for all futures positions outstanding.

Getting the Most of Your Margin Dollars

Customers who routinely maintain a high balance of excess margin in their account can earn interest income by using some of this excess margin to purchase U.S. government securities such as Treasury bills or Treasury bonds. There is a small administrative charge for this service. The purchased bills or bonds earn interest and must remain in the margin account in order to provide equity. It is important, however, that the customer retain an appropriate level of cash in the margin account. In the event that cash deteriorates significantly, U.S. securities held in the account will be liquidated to provide necessary margin funds.