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Expanding Margin Rates in Silver

The CME Group yesterday announced that it would be bumping the margin on the silver futures contract from $5000 to $6500 effective today. That’s a 30% bump, which no doubt has impacted some traders. In making this move, the exchange increased the margin from about 3.6% (at current prices as I write this) to about 4.7% (a silver contract being 5000 troy ounces). The chart below explains the move.

Silver prices have jumped about 50% since the end of August. Back then, the $5000 margin was about 5.4%. Volatility was also significantly lower. Now we’re looking at a much higher price and significantly higher volatility. The futures exchanges will make adjustments to margins based on both factors as they see fit. It’s interesting in this case, though, that they haven’t bumped it up to the approximate level it was before.