Cheap daytrading margin is not a risk discount

Daytrading margin is a broker setting

Daytrading margin is the collateral a brokerage requires to open a futures position that is expected to be closed before the same session ends. Overnight margin is the exchange-declared minimum for a position held past the session close. For futures, daytrading margin is set by the brokerage. It is not set by the exchange overnight minimum.

At the time of writing, exchange overnight margin for one E-mini S&P 500 contract was $5,060. Some brokers offered daytrading access at 50% ($2,530), 25% ($1,265), or a flat $500.

Volume, stress, and a moving requirement

Very low daytrading margin can encourage higher trade volume, which increases brokerage commission income. Futures traders can lose more than the cash on deposit, so the brokerage also carries risk on each client trade.

An account that has been exhausted no longer produces commission. That gives a firm a reason to restrain client leverage during stress.

During the August 2015 flash crash, some firms raised daytrading margin to match higher volatility. Daytrading margin can be revised at any time, so a firm that has not yet raised it may still do so.

A cheap ticket can meet a fast exit

Some low-margin firms may force-exit quickly. One described policy allowed $500 to enter but liquidated if the balance fell below $400 per open contract. Forced liquidation is a broker-initiated market exit when account equity falls through an internal threshold.

A $500 daytrading requirement in an E-mini S&P market moving 10 to 20 handles in a short interval can deplete an account if the position is on the wrong side of the move. Handle is used here as an informal futures increment for a large, fast price swing.