Two Serious Problems in Hypothetical Performance Accounting for Futures

I’ve been autotrading one futures system and regularly see two problems in my performance numbers versus the hypothetical performance numbers, both due to the fact that apparently C2’s software doesn’t take margin requirements into account.

The first problem is that trades are considered executed even if the margin requirements for the trade and current open positions exceed the current model account equity. In real life, my broker rejects those trades and my autotraded positions go out of sync with the model account. But C2 considers those trades as executed and tracks them in the model account–even though the model account could not execute those trades either with the equity that it supposedly has.

The second problem is that the margin requirements for futures can change dramatically if the positions are held overnight. For example, futures for the

      DAX 30 Index (Deutsche Aktien Xchange 30)

at Interactive Brokers are set at around $13k for initial intraday and $10K for intraday maintenance. But hold a position overnight and the requirements change to $26K and $20.8K respectively. In real life, if a position is taken and the overnight margin is projected to be higher than the account equity, IB will automatically liquidate positions to bring the account within the required margin requirements shortly before the end of the day session–and the autotrade sync once again is broken. If the trade is reinstituted the next day when another day session begins, of course the new entry price can be far different from the forced exit price–for better or worse. But the model account performance tracking assumes the trade is carried overnight even if the equity in the model account would not allow that.

I’m all in favor of C2 continuing to send and track signals issued by the system developer whether or not the model account can execute them. Some traders will have more money in their account than the model account of the system and will want to execute those trades. But the performance accounting should only consider trades that really would have taken place, and should liquidate those trades if they couldn’t be held overnight because the equity in the model acount is too low to do that.

I understand that’s a programming challenge. Perhaps two stats could be kept–one where the equity in the model account is ignored (as now) and one where it is considered.

I’m not sure why you think c2 doesn’t take into account margin use in your Model Account. We do. You can see the initial and maintenance margins we require in model accounts here:
collective2.com/symbols

The problems I reported were correct–trades taken in the hypothetical account that were not permitted in real life trading with IB because required margins were too high. In each case I had more money in my account than the model account for the system I am autotrading. Perhaps the explanation is simply that your margin table is out-of-date for futures, or not compatible with the IB margins. For example, you have the margin for XG, the DAX index, as 10,000 euros. The current margin is 22,090 euros: You have the margin for the EUREX BUND as 1600 euros–current margin is 2230 euros.

I don’t know where you’re getting your margins, but here’s the list for IB:

https://www.interactivebrokers.com/en/?f=margin&p=fut

TradeStation has this list online:

My apologies for the bad assumptions in my original post–and thanks very much for your insanely rapid response!

Matthew,

I can confirm the disparity in margin calculations. Currently my C2 system shows a margin to equity requirement of approx. 24% (based on the current trading costs all-in balance [shown on the equity curve]) but a Interactive Brokers account currently requires about 36% margin to equity.

I am not sure how often you update the margins attached to your C2 trading symbols, but you could just automate the collection and update of C2 symbol margins from the Interactive Brokers margin web page on a daily or weekly basis.

Automation is probably the best answer. I’ll post here when completed.

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If you want to apply interactive brokers intraday margins maybe you should do the same with the commissions $13.98 RT doesn’t sound right …

Dax required margin is currently showing €26531.2 / €21225 , however the intraday margin for this contract with IB is half that : 13K/10K euros .

We don’t support day-trading margins for all instruments, but for the DAX we will. I have adjusted the intraday to 13K EUR.

Thanks MK , but with IB the maintenance is 10500 , the 13K is initial or maintenance ?

Our margin engine allows only have one kind of “intraday” margin, so in this case, whatever is initial is effectively maintenance too. So it is 13K initial and maintenance. (We do support different initial and maintenance margins for non-intraday margining.)

BTW are profits from Euro dominated contracts realized in $ - in C2 site - ? I’ve noticed some fluctuation in closed trades profits - in C2pro site - when the euro moves .

Profits should be locked in USD at the time the euro-denominated trade closes.

Hello JeffreyNeedleman, I am developing my own system for C2. And have exactly the problem for my Subscribers.

In my system, I set directly a high depot size to ensure that the broker is not prematurely terminated the positions.

Even a reinvestment is difficult. Also I set fixed fixed values (max. Number of Fututes, max. Use money per trade, etc.).

Greetings Matthias Schulz

BTW, I meant to formally follow-up on this thread.

Over the weekend, I added a daily process which automatically updates futures margin requirements for C2’s Model Accounts. I base our margin requirements on Interactive Brokers’; although, as I mentioned a bit earlier, C2 diverges when it comes to intraday day-trading margin, which we support in only limited cases, and generally more conservatively than most brokers.

But overnight margins at C2 will hew closely to IB’s.

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I don’t want to mention the name of the system I’m autotrading–but you can identify it. As of the close today, July 3rd, it shows an equity of below $20K in the model account–with six open futures positions, including one position in XGU5, the DAX Index, which has a margin requirement of €26,531 initial and €21,225 maintenance at your futures margin page https://collective2.com/symbols.

The other 5 open positions have an initial margin requirement of $32,707.50 at IB with maintenance set at $25,606.00. Those figures are from my own IB account tonight.

In my autotrading, I was unable to carry the XGU5 position overnight because my equity was too low, and I could not trade it when the signal was issued because my equity was too low to trade it at that time too–even though my equity is more than twice that in the model account. IB notified me shortly before today’s close that it would liquidate some of my positions if I didn’t close enough to bring the margin in line with its requirements.

So the problem remains…