How Does “Initial Margin” Differ from “Maintenance Margin” in Derivatives Trading?
Initial margin is the minimum amount of capital required to open a leveraged derivatives position. It acts as a performance bond.
Maintenance margin is the minimum amount of equity that must be kept in the margin account after the position is opened. If the account equity falls below the maintenance margin due to losses, a margin call is issued, or the position is automatically liquidated.
Initial margin is always greater than or equal to maintenance margin.
