Define “Initial Margin” and “Maintenance Margin.”
Initial margin is the minimum amount of collateral a trader must deposit and maintain in their margin account to open a new futures position. It acts as a performance bond.
Maintenance margin is a lower threshold of collateral that must be kept in the account once the position is open. If the account equity falls below the maintenance margin due to losses, the trader receives a margin call and must deposit funds to bring the account back up to the initial margin level.
