Why Is a Maintenance Margin Level Always Lower than the Initial Margin Level?
The maintenance margin is set lower than the initial margin to provide a buffer for the trader. The difference between the two allows the position to absorb some unrealized losses before a liquidation is triggered.
This buffer gives the trader time to either add more collateral or close the position voluntarily, preventing immediate liquidation upon minor price fluctuations.
Glossar
Maintenance Margin Level
Collateral ⎊ The maintenance margin level, within cryptocurrency derivatives and options trading, represents the minimum equity a trader must maintain in their account relative to their margin requirements.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Initial Margin
Collateral ⎊ Initial margin represents the equity a trader must deposit with a broker or exchange as a good faith commitment to cover potential losses arising from derivative positions, notably within cryptocurrency markets.