Define 'Variation Margin' and Its Relationship to 'Initial Margin' ⎊ Path

Define ‘Variation Margin’ and Its Relationship to ‘Initial Margin’.

Initial margin is the collateral posted upfront to cover potential future losses over a specific liquidation period. Variation margin (VM) is the daily or intraday transfer of funds between counterparties to cover losses or gains resulting from the daily marking-to-market of the position.

VM ensures the exposure never exceeds the initial margin, maintaining the collateral level to reflect the current market value of the contract.

How Does the Correlation between Assets Affect the Effectiveness of Cross-Margining?

Why Is the Variation Margin Process Not Typically Applied to Options Buyers?

How Does the Exchange Calculate a Position’s Unrealized P&L Using the Mark Price?

Define ‘Initial Margin’ versus ‘Variation Margin’ in Derivatives Collateral

What Regulatory Hurdles Exist for Implementing Cross-Margining in Cryptocurrency Derivatives?

How Does Variation Margin Settlement Affect a Trader’s Cash Balance Daily?

What Is the Key Difference between Variation Margin and Maintenance Margin?

What Is the Process of ‘Marking to Market’ for a Futures Contract?

Glossar

Standard Portfolio Margining

Principle ⎊ Standard Portfolio Margining is a risk-based methodology for calculating margin requirements across an entire portfolio of positions, encompassing both crypto assets and derivatives, by netting offsetting risks rather than calculating margin on a gross, position-by-position basis.