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short derivative and buy stocks?
if i short one derivative like a 2 year treasury bond future, priced $110,leveraged 10 to one so i receive $1100( now i have 1210 in total in my account). could i then buy say another stock/ derivative with the $1100 i have while keeping the original $110 as margin the requirement. Also could i further leverage this $1100 when buying another stock or derivative. Thanks in advance
1 Answer
- JoeyVLv 79 years agoFavorite Answer
Shorting a future doesn't give you any money of course (I wonder where you think that money comes from). It costs you a margin deposit.
1) If you short one 2 year treasury note (not bond) future, you have a short position in $200K notional of bonds. Because of the mechanics of the contract, that doesn't mean that the contract is worth 1.10*200K because the value of the contract depends on the note you deliver. There are at least 30 notes deliverable under the contract now.
2) The margin requirement for the contract at my broker on Friday was $371. That means to short the contract it costs you $371 of margin money (which is still your money). No additional money is put in your account long or short.
3) Why you would want more leverage than this is not known to me - you have just gotten a controlling interest in $200K face in bonds for $371 which seems like plenty of leverage to me.