When Futures Intraday Trading Profits Reach a Trader’s Cash Account
Summary
The document asks when a futures trader can use profits from a position opened and closed during the same day. Its example compares a long entered at 100 with a later close at 101, following a prior settlement at 99. The accepted explanation says the exchange credits the clearing broker at end-of-day settlement, and the broker then credits the customer’s cash account that day. Exchanges do not settle directly with end investors.
The answer leaves open whether some brokers make expected settlement proceeds available intraday. It suggests that interest generally cannot be earned on the profit during the day, while noting that cash interest at a brokerage may be limited even across longer periods. The discussion is a brief general explanation rather than a survey of exchange or broker rules, so actual availability and interest treatment may depend on the clearing broker and account terms.
Key ideas
- Futures gains are credited through the clearing broker at end-of-day settlement.
- The exchange settles with the clearing broker rather than directly with the end investor.
- A broker may choose to make expected settlement proceeds available intraday, but the answer does not confirm that practice.
- The timing of cash availability can limit the ability to earn intraday interest on trading profits.
Tags
Full text
# When are intra-day profits from futures settled? # When are intra-day profits from futures settled? I'm trying to understand exactly when cash changes hands in regards to a futures contract, ignoring exchange fees, say for the purpose of determining how much interest I could receive on the cash. Suppose the previous day's settlement price of the future was 99 dollars. If I enter into a long position in a futures contract at a price of 100 dollars, then I enter a short position within the same trading day at a price of 101 dollars, when exactly do I receive the 1 dollar profit? I see 3 possibilities in order from most to least likely: - The exchange just keeps track of all the long and short positions and prices of those positions made by everyone and settles them all at the end of the day, regardless of whether a position is still open or closed before the end of the day. I cannot earn interest on my 1 dollar profit intra-day. - No money exchanges hands when I enter the long position, the exchange keeps track of open positions and I get the 1 dollar when I enter the short position and close my position. I can earn interest on my 1 dollar profit immediately after closing my position. - Money changes hands immediately based off the difference of the market price and the previous day's settlement price, so when I enter my long position I pay 1 dollar, then when I close my long position I receive 2 dollars. I may have to pay interest on the 1 dollar I borrow when I open the position, but then I can receive interest on my profit of 1 dollar after closing my position. I'm guessing the answer is 1. uniformly across all exchanges, but I'd be interested to know the details and if any exchanges do it any other way. ## Answer by ThatDataGuy (score 2, accepted) https://quant.stackexchange.com/a/67974 The exchange credits your clearing broker with 1 USD at settlement EOD. Your clearing broker then credits your cash account with 1 USD same day EOD. Exchanges don't deal with end investors directly. I don't know if a clearing broker credits that 1 USD intraday so that you can use it before EOD, but maybe some do. Certainly they know that they will get that 1 USD from the exchange, so it's possible. I don't believe you can earn any interest intraday. I doubt these days that clearing brokers offer any meaningful interest on cash in your cash account, even over multiple days. If you care about that, sweep the cash back to your bank.
Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.