How Is the Margin Requirement for a Futures Contract Calculated?
The margin requirement is the collateral needed to cover potential losses. It is typically calculated based on the contract's notional value, the underlying asset's volatility, and the trader's risk profile.
Initial margin is the amount required to open a position. Maintenance margin is the minimum amount required to keep the position open, and if breached, triggers a margin call.
Glossar
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.
Collateral
Asset ⎊ Collateral, within the domain of crypto derivatives and decentralized finance, refers to the digital asset or assets pledged by a market participant to secure a loan or to cover potential losses on a leveraged trading position.
Initial Margin
Collateral ⎊ Initial margin represents the equity a trader must deposit with a broker or exchange as a good faith commitment to cover potential losses arising from derivative positions, notably within cryptocurrency markets.
Volatility
Measurement ⎊ Volatility, in quantitative finance, is the statistical measurement of the dispersion of returns for a given financial asset, typically quantified by the annualized standard deviation of its price movements.