Why Is the Maintenance Margin Typically Lower than the Initial Margin?
The initial margin is set higher to provide a larger safety buffer for the exchange to absorb immediate adverse price movements before the account becomes under-collateralized. The maintenance margin is the minimum level required to keep the position open.
The difference between the two allows time for the trader to meet a margin call before the account's equity is fully depleted.
Glossar
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.
Adverse Price Movements
Volatility ⎊ Adverse price movements within cryptocurrency derivatives, options, and financial derivatives represent deviations from anticipated price trajectories, often amplified by leverage and market microstructure effects.