What Is the Role of ‘Initial Margin’ in Perpetual Swaps?

Initial margin in perpetual swaps serves the same function as in traditional futures: it is the collateral required to open a leveraged position. It acts as a performance bond to cover potential losses and is a fraction of the total contract value.

The initial margin level determines the maximum leverage a trader can use. It is crucial for the exchange's risk management, ensuring that traders have sufficient capital to absorb adverse price movements before the liquidation process begins.