Distinguish between Initial Margin and Maintenance Margin in Futures Trading.
Initial margin is the minimum amount of capital a trader must deposit to open a leveraged futures position. It acts as a performance bond.
Maintenance margin is the minimum amount of capital that must be kept in the margin account to keep the position open. If the account equity falls below the maintenance margin level, a margin call is triggered, requiring the trader to deposit additional funds.
Glossar
Account Equity
Valuation ⎊ Account equity, within cryptocurrency, options, and derivatives, represents the residual claim on an account’s assets after deducting all liabilities, functioning as a real-time measure of net worth exposed to market fluctuations.
Initial Margin
Collateral ⎊ Initial margin represents the equity a trader must deposit with a broker or exchange as a good faith commitment to cover potential losses arising from derivative positions, notably within cryptocurrency markets.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Initial Margin and Maintenance Margin
Collateral ⎊ Initial margin represents the equity a trader must deposit with a broker to open and maintain a leveraged position in cryptocurrency derivatives or options, functioning as a performance bond to cover potential losses.
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.