How Does a Futures Trader Hedge against Unexpected Margin Calls?
A trader can hedge against unexpected margin calls by maintaining a substantial cash buffer above the initial margin requirement. They can also use options (e.g. buying out-of-the-money puts for a long futures position) to cap potential losses, or diversify their portfolio to reduce overall correlation risk.
Effective hedging is crucial for managing leverage risk.
Glossar
Unexpected Margin Calls
Call ⎊ Unexpected Margin Calls represent a sudden demand from a derivatives exchange or broker for a trader to deposit additional collateral to bring their margin account back up to the required maintenance level.
Futures Position
Contract ⎊ A futures position represents a binding agreement to trade an underlying asset at a specific price on a future settlement date.