Is the Maintenance Margin Always Lower than the Initial Margin?
Yes, the maintenance margin is always lower than the initial margin. The initial margin is the deposit to open the position, and the maintenance margin is the minimum threshold to keep it open.
The difference between the two provides a buffer against adverse price movements before a margin call is issued.
Glossar
Minimum Threshold
Trigger ⎊ A minimum threshold, within cryptocurrency derivatives, often defines the price level initiating a specific action, such as liquidation of a leveraged position or activation of a stop-loss order, directly impacting risk exposure.
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.
Margin Call
Trigger ⎊ A margin call in cryptocurrency, options, and derivatives markets represents a broker’s demand for additional funds to bring an account back to the minimum required margin.
Adverse Price Movements
Volatility ⎊ Adverse price movements within cryptocurrency derivatives, options, and financial derivatives represent deviations from anticipated price trajectories, often amplified by leverage and market microstructure effects.
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.
Initial Margin and Maintenance Margin
Collateral ⎊ Initial margin represents the equity a trader must deposit with a broker to open and maintain a leveraged position in cryptocurrency derivatives or options, functioning as a performance bond to cover potential losses.