Definition
Margin is the capital a trader must provide and maintain to support a leveraged derivatives position and absorb potential losses.
Initial and maintenance margin
Initial margin is the amount required to open a position. Maintenance margin is the minimum support the account must retain while the position remains open. If account equity falls below the maintenance requirement, the venue may reduce or liquidate the position.
Requirements can depend on position size, volatility, market rules and the venue's risk model. They can change while a position is open.
Cross margin and isolated margin
Cross margin allows eligible account collateral to support multiple positions. A loss in one position can therefore consume collateral supporting another.
Isolated margin assigns a defined amount of margin to one position. Losses are contained within that allocation, although the position can be liquidated sooner if additional margin is unavailable.
What it does not mean
Margin is the capital supporting a position. Leverage is the ratio between the position's exposure and that capital. Futures margin is not a purchase deposit or a trading fee.
Where this term fits
Questions about margin
- Is margin the same as leverage?
- No. Margin is the supporting capital. Leverage measures how large the position is relative to that capital.
- Is margin a fee?
- No. Margin remains part of the account unless it is consumed by losses, fees, funding payments or liquidation outcomes.
- Can margin requirements change?
- Yes. Venues and clearing houses can adjust requirements based on position size, volatility and other risk factors.
See these concepts in context
Review the Fensory MCP connection, tools and account controls.