What Is ‘Maintenance Margin’ and How Is It Calculated?
Maintenance margin is the minimum amount of equity required to keep a leveraged position open. If the account equity falls below this level, a margin call or liquidation is triggered.
It is typically a percentage of the notional value of the position. Exchanges calculate it based on the position size and the risk associated with the underlying asset.
Larger positions often have higher maintenance margin requirements due to greater systemic risk.
Glossar
Maintenance Margin Requirements
Threshold ⎊ Maintenance Margin Requirements are the minimum level of equity or collateral that a derivatives trader must continuously maintain in their account to keep open positions active, calculated as a percentage of the total contract value.
Position Size
Allocation ⎊ Position size, within cryptocurrency and derivatives markets, represents the proportional capital commitment to a specific trade or investment relative to total available trading capital; it’s a fundamental risk management parameter directly influencing portfolio volatility and potential drawdown.
Liquidation
Trigger ⎊ Liquidation in cryptocurrency derivatives represents the forced closure of a trading position due to insufficient margin to cover accruing losses, a critical event impacting market stability.
Account Equity
Balance ⎊ Account equity represents the total capital an investor holds within a trading account, encompassing both settled funds and the current market value of all open positions.
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.
Margin Requirements
Collateral ⎊ Margin requirements represent the equity a trader must deposit with a broker or exchange as a good faith measure, securing potential losses arising from leveraged positions within cryptocurrency, options, and derivative markets.