Can Variation Margin Be Negative, and What Does That Signify?
Yes, variation margin can be negative. A negative variation margin signifies that the futures position has incurred a loss during the trading day, meaning the contract's price moved adversely to the trader's position.
This negative amount is then debited from the trader's margin account as part of the daily marking-to-market process, reducing the account's equity.
Glossar
Margin Account
Leverage ⎊ A margin account in cryptocurrency, options, and derivatives trading represents an equity-backed loan from a broker, enabling traders to control a larger position than their available capital would otherwise permit.
Negative Variation Margin
Trigger ⎊ Negative Variation Margin represents a critical threshold in risk management for cryptocurrency derivatives, signaling an immediate shortfall in an account’s equity relative to required maintenance margin levels.
Variation Margin
Collateral ⎊ Variation Margin represents a dynamic adjustment to posted collateral requirements in cryptocurrency derivatives markets, reflecting real-time mark-to-market losses on open positions.