How Does Variation Margin Contribute to the ‘Zero-Sum’ Nature of Futures Trading?

Futures trading is a zero-sum game because for every dollar gained by a long position, a dollar is lost by a short position, and vice versa. Variation margin is the mechanism that enforces this.

Each day, the profit (variation margin received) of the winner is directly transferred from the loss (variation margin paid) of the loser, ensuring that the net change in wealth for all market participants is zero, excluding fees.