Definition
Initial margin is the deposit an exchange or broker requires before you can open a futures position. Maintenance margin is the lower level the account must stay above while the position is open. If equity falls below it, you get a margin call.
Margin here is not a fee or a down payment on the asset. It is collateral that backs your obligation under the derivative contract.
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Formal definition and mechanics
On a futures exchange, the central counterparty sets the minimum margin requirement for each contract. The requirement is usually a fixed amount per contract, based on the contract's contract size and its recent volatility.
- Initial margin: the amount needed per contract to open a position.
- Maintenance margin: a lower threshold, below the initial margin.
- Variation margin: the daily gains and losses credited or debited when open positions are marked to market at the settlement price. For the full daily cycle, see clearing and settlement.
In the usual futures convention, a margin call asks you to restore the account to the initial margin, not just back up to the maintenance level. If you do not meet the call, the broker can close the position.
Worked example (hypothetical)
This example uses letters instead of amounts. To try real amounts, use the tools on the calculators page.
- A trader buys a futures contract. The exchange sets initial margin at amount A and maintenance margin at amount M, where M is lower than A. The trader deposits A.
- The price falls. At the daily settlement, the loss is debited and account equity drops below M.
- The broker issues a margin call. The trader must add enough funds to bring equity back up to A.
- If the trader does not add funds in time, the broker closes the position. The trader keeps whatever equity is left. If prices gapped, that equity may be less than expected.
Losses on leveraged positions can exceed the initial deposit, and they can build up quickly.
Edge cases experienced traders meet
- House margin: brokers may require more than the exchange minimum.
- Changes in volatile markets: exchanges can raise margins at short notice. Open positions then need more collateral.
- Intraday versus overnight: some brokers apply lower margins during the session and full exchange margins for positions held past the close.
- Near expiry: margins on the front month can rise as the expiry date approaches. This is one reason traders roll positions.
- Securities margin accounts: maintenance is often set as a share of position value. A call may only require restoring that level.
- CFD and forex accounts: these usually show margin, margin level and stop-out instead of exchange-style initial and maintenance margin.
Where you see the terms
- Exchange margin circulars and broker margin tables.
- Futures account statements, which show initial margin, maintenance margin, variation margin and margin calls.
- Contract specifications for exchange instruments in MetaTrader 5, which include "Initial margin" and "Maintenance margin" fields.
- News reports such as "exchange raises margins on gold futures".
In Pakistan, exchange-traded commodities must be traded through brokers licensed by the Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers. Also, per the SECP, lists of licensed brokers are on the PSX and PMEX websites. For more, see regulation and safety.
Related terms
Exposure · Forward contract · Counterparty · Risk management · Trading glossary
Frequent questions
What does initial margin mean?
It is the collateral required per contract to open a futures position.
What does maintenance margin mean?
It is the minimum equity you must keep while the position is open. Falling below it triggers a margin call.
Is margin a cost?
No. It is collateral held against possible losses. Fees and losses are separate.
After a margin call, how much must I deposit?
In futures, usually enough to bring equity back to the initial margin. Your broker's rules decide the exact terms.
Can I lose more than the initial margin?
Yes. Fast price moves or gaps can create losses larger than the deposit.