Is the Initial Margin Requirement Static or Can It Change with Market Conditions? ⎊ Path

Is the Initial Margin Requirement Static or Can It Change with Market Conditions?

The Initial Margin requirement is not entirely static; it can change with market conditions, primarily volatility. While the percentage required for a given leverage level is set, the exchange's risk team can increase the margin requirement across all tiers if volatility is expected to surge.

This preemptive adjustment is a crucial risk management tool to create a larger buffer against potential price swings and reduce the likelihood of mass liquidations.

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Glossar

Margin Requirement

Collateralization Standard ⎊ Margin Requirement is the minimum amount of collateral, expressed as a percentage of the notional value, that a trader must deposit to open or maintain a leveraged derivatives position, ensuring the exchange has a buffer against adverse price movements.

Initial Margin Requirement

Definition ⎊ Initial margin requirement specifies the minimum amount of capital a trader must deposit into a margin account to open a new leveraged position in a derivative contract.