What Is the Difference between “Initial Margin” and “Maintenance Margin”?
Initial margin is the minimum amount of collateral required to open a new derivatives position. It is the deposit needed to cover potential losses from the trade.
Maintenance margin is a lower threshold; it is the minimum amount of collateral required to keep the position open. If the account's equity falls below the maintenance margin level due to losses, a margin call is issued, and if not met, the position is liquidated.
The difference acts as a buffer against volatility.
