Explain the Concept of “Initial Margin” in Derivatives Trading.
Initial Margin is the amount of capital a trader must deposit and maintain in their brokerage account to open a leveraged derivatives position, such as a futures or options trade. It acts as a performance bond, ensuring the trader can cover potential losses.
This is distinct from "Maintenance Margin," which is the minimum balance required to keep the position open. Failing to meet the maintenance margin triggers a margin call.
