What Is the Role of ‘Margin’ in a Futures Contract?
Margin is a good-faith deposit of funds required from both the buyer and seller to ensure they can cover potential losses. It acts as collateral for the clearing house.
The initial margin is the amount required to open a position, and the maintenance margin is the minimum balance that must be kept in the account. Margin is crucial for managing the leverage inherent in futures trading and for mitigating counterparty risk.
