What Is a ‘Margin Call’ and How Does It Relate to Maintenance Margin?
A margin call is a notification from a broker or exchange to a trader, demanding that they deposit additional funds to bring their margin account back up to the required level, typically the initial margin level or to prevent it from falling below the maintenance margin. While common in traditional finance, crypto futures exchanges often skip the call and proceed directly to automatic liquidation once the maintenance margin is breached, due to the high volatility of learn.
Glossar
Deposit Additional Funds
Deposit ⎊ Within cryptocurrency, options trading, and financial derivatives, a deposit signifies the allocation of capital to a trading account or platform, enabling participation in various market activities.
Automatic Liquidation
Liquidation ⎊ Within decentralized finance (DeFi) and cryptocurrency derivatives, liquidation represents a mechanism designed to mitigate counterparty risk when a collateralized position falls below a predetermined threshold.
Initial Margin Level
Collateral ⎊ Initial Margin Level, within cryptocurrency derivatives and options trading, represents the portion of a trader's margin requirement secured by assets, distinct from the variation margin posted 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.
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.