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What Is the Purpose of ‘Collateral’ in a Futures Contract?

To secure the leveraged futures contract and mitigate counterparty risk by ensuring traders can cover potential losses.
Greeks.Live07.11.25

What Is the Purpose of ‘Collateral’ in a Futures Contract?

Collateral in futures trading is the margin required to secure the contract and mitigate counterparty risk. Since futures are leveraged agreements, collateral ensures that traders can cover potential losses.

If the market moves against the trader, the collateral (margin) is used to satisfy the loss, protecting the exchange and the other side of the trade.

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