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The initial margin for Dutch (TTF) natural gas futures jumped from €2,880 in May 2021 to its current level of €51,120.
The initial margin for Dutch (TTF) natural gas futures jumped from €2,880 in May 2021 to its current level of €51,120.
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How fast a rise is this? Initial margin rates have increased faster than the price.
Since May 2021:
* Margin rates (blue) are up 1675% (16x)
* Prices are up 855% (8x)
How fast a rise is this? Initial margin rates have increased faster than the price.
Since May 2021:
* Margin rates (blue) are up 1675% (16x)
* Prices are up 855% (8x)
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How can margins increase faster than prices? It is due to the futures clearing houses using variation margin, which sets margins rate based on volatility.
investopedia.com.
How can margins increase faster than prices? It is due to the futures clearing houses using variation margin, which sets margins rate based on volatility.
investopedia.com.
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So as prices (blue) and volatility (green) spike, margins increase 16x, and open interest (orange below) falls by more than 50%.
This results in a discontinuous, illiquid market.
Looking at such a market for signals is tenuous at best and downright incorrect at worst.
So as prices (blue) and volatility (green) spike, margins increase 16x, and open interest (orange below) falls by more than 50%.
This results in a discontinuous, illiquid market.
Looking at such a market for signals is tenuous at best and downright incorrect at worst.
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