How Does the Maintenance Margin Level Affect the Required Collateral for a Position?
The maintenance margin level is the minimum collateral required to keep a position open. A lower maintenance margin means less collateral is required, allowing the trader to use higher leverage and potentially risking a faster liquidation.
A higher maintenance margin requires more collateral, reducing leverage and providing a larger buffer against adverse price movements.
Glossar
Maintenance Margin Level
Collateral ⎊ The maintenance margin level, within cryptocurrency derivatives and options trading, represents the minimum equity a trader must maintain in their account relative to their margin requirements.
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.
Required Collateral
Provision ⎊ Required collateral, within cryptocurrency derivatives, represents pre-funded capital ensuring solvency against potential adverse price movements or counterparty default; it’s a critical component of risk management, particularly in perpetually settled contracts where mark-to-market losses are realized continuously.
Minimum Collateral Required
Requirement ⎊ Minimum Collateral Required defines the absolute lowest amount of margin capital, expressed as a percentage of the notional position value, that a trader must maintain in their account to keep an open leveraged position active without facing immediate liquidation.