Can a Sudden Drop in Volatility Also Trigger a Margin Adjustment?

Yes, a sustained, significant drop in volatility can also trigger a margin adjustment, but in the opposite direction ⎊ a decrease in the required margin. Lower volatility means a lower probability of extreme price movements, which reduces the risk of a liquidation deficit.

The exchange may lower margin requirements to increase capital efficiency for traders and encourage trading activity, though such decreases are often implemented cautiously.