Maintenance margin
The minimum level at which the equity in a futures account must be maintained. If the equity in an account falls below this level, a margin call will be issued, and funds must be added to bring the account back to the initial margin level. The maintenance margin level generally is 75% of the initial margin requirement.
Managed account
See Discretionary account
Margin
Margin in futures is a performance bond or “earnest money.” Margin money is deposited by both buyers and sellers of futures contracts, as well as sellers of futures options. See Initial margin.
Margin call
A call from the clearinghouse to a clearing member (variation margin call), or from a broker to a customer (maintenance margin call), to add funds to their margin account to cover an adverse price movement. The added margin assures the brokerage firm and the clearinghouse that the customer can purchase or deliver the entire contract, if necessary.
Market order
An order to buy or sell futures or futures options contracts as soon as possible at the best available price. Time is of primary importance.
Market-if-touched order (MIT)
They are similar to stop orders in two ways: 1) They are activated when the price reaches the order level; 2) They become market orders once they are activated; however, MIT orders are used differently from stop orders. A buy MIT order is placed below the current market price, and establishes a long position or closes a short position. A sell MIT order is placed above the current market price, and establishes a short position or closes a long position.
Market-share weighted index
An index where the impact of a stock price change depends upon the market-share that stock controls. For example, a stock with a large market share, such as IBM with over 600 million shares outstanding, would have a greater impact on a market-share weighted index than a stock with a small market-share, such as Foster Wheeler, with approximately 34 million shares outstanding.
Market-value weighted index
A stock index in which each stock is weighted by market value. A change in the price of any stock will influence the index in proportion to the stock’s respective market value. The weighting of each stock is determined by multiplying the number of shares outstanding by the stock’s market price per share; therefore, a high-priced stock with a large number of shares outstanding has more impact than a low-priced stock with only a few shares outstanding. The S&P 500 is a value weighted index.
Mark-to-market
The IRS’s practice of calculating gains and losses on open futures positions as of the end of the tax year. In other words, taxpayers’ open futures positions are marked to the market price as of the end of the tax year and taxes are assessed as if the gains or losses had been realized.
Maturity
The period during which a futures contract can be settled by delivery of the actuals; i.e., the period between the first notice day and the last trading day. Also, the due date for financial instruments.
Maximum price fluctuation
See Limit move.
Minimum price fluctuation
The smallest allowable fluctuation in a futures price or futures option premium.
Monthly statement
An account record for each month of activity in a futures and/or futures options account. Quarterly statements are required for inactive accounts.
Moving average
An average of prices for a specified number of days. If it is a three (3) day moving average, for example, the first three days’ prices are averaged (1,2,3), followed by the next three days’ average price (2,3,4), and so on. Moving averages are used by technicians to spot changes in trends.
