What Is the Difference between Initial Margin and Maintenance Margin in Derivatives Trading?
Initial margin is the amount of capital a trader must deposit to open a leveraged derivatives position, acting as a performance bond. Maintenance margin is a lower threshold; it is the minimum amount of equity required to keep the position open.
If the equity falls below the maintenance margin due to adverse price movement, the trader receives a margin call and must deposit additional funds to bring the account back up to the initial margin level.
Glossar
Margin Requirements Comparison
Collateral ⎊ Margin requirements comparison, within cryptocurrency, options, and derivatives, fundamentally assesses the capital needed to secure potential losses arising from adverse price movements.
Maintenance Margin Updates
Adjustment ⎊ Maintenance margin updates involve changes to the minimum collateral required to sustain open leveraged positions.
Initial Margin for Crypto Options
Margin ⎊ Margin is the initial deposit of Collateral ⎊ required to open a leveraged position in cryptocurrency options, acting as a performance bond against potential adverse price changes.
Initial Margin Framework
Framework ⎊ The Initial Margin Framework (IMF) governs the calculation and collection of initial margin ⎊ the collateral required by counterparties to cover potential losses from mark-to-market changes in derivative contracts.
Margin Maintenance Calls
Notification ⎊ Margin maintenance calls represent a formal notification issued by a derivatives exchange to a leveraged trader whose account equity has fallen to a critically low level, approaching the threshold for forced liquidation.
Initial versus Maintenance Margin
Definition ⎊ Initial versus Maintenance Margin refers to the distinct collateral levels required to open a leveraged derivatives position compared to the minimum collateral level required to keep that position open subsequently.
Leverage and Maintenance Margin
Constraint ⎊ The maintenance margin acts as a critical constraint on the maximum allowable adverse movement before mandatory deleveraging is triggered.
Higher Maintenance Margin
Requirement ⎊ A higher maintenance margin represents an elevated minimum equity threshold required to keep a leveraged position active.
Portfolio Margining Strategies
Leverage ⎊ Portfolio margining strategies, within cryptocurrency derivatives, represent a capital efficiency technique enabling traders to deploy more substantial positions than afforded by segregated account margin requirements.
Initial Margin Standards
Requirement ⎊ Initial margin standards define the minimum collateral percentage required by an exchange or protocol to permit a trader to open a new leveraged position in a derivative contract.