Margin
The capital your broker requires you to post to open and hold a leveraged position.
Also called: margin requirement · initial margin · maintenance margin
Written by Javier Sánchez Ros
In plain language
Margin is collateral, not a fee. Initial margin is what you must put up to open a position; maintenance margin is the minimum equity you must keep to hold it.
As a position moves against you, your equity falls toward the maintenance level. Reach it and the broker issues a margin call or liquidates the position on your behalf.
Margin requirements are not fixed. Brokers raise them during volatile periods, which can force position reductions at the worst possible time.
Worked through
One ES futures contract with $15,000 of account equity
- Initial margin
- ≈ $13,000
- Maintenance margin
- ≈ $12,000
- Buffer above maintenance
- $3,000
- ES points that consumes
- 60
Margin figures are set by the exchange and the broker and change with volatility, so treat these as the shape rather than today’s quote. The structure is what matters: initial margin is what you post to open, maintenance margin is the floor you must stay above to keep it open.
With $15,000 of equity against roughly $12,000 of maintenance, there is a $3,000 cushion. At $50 a point on ES that is 60 points — a distance the index can cover in a single session without anything unusual happening.
The critical word is collateral. Margin is not the cost of the trade and it is not the maximum loss; it is money set aside that you get back when the position closes. Losses come out of equity, and equity can fall past the posted margin. On a gap, a futures position can owe more than was ever deposited.
This is also the boundary your stop does not control. Your stop is an instruction to the market. Maintenance margin is a condition on your account, and when it is breached the broker acts first — choosing what to close, when, at whatever price is available.
Why it matters
Margin defines the point where your broker takes control of your trade. That is a hard boundary independent of where you placed your stop.
Common mistakes
- Confusing margin posted with maximum loss. You can lose more than the initial margin.
- Running so close to maintenance margin that normal noise triggers liquidation.
- Not knowing whether your broker calls first or liquidates immediately.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
Using borrowed capital to control a position larger than your account balance.
A broker demand for more capital when account equity falls below the required minimum.
The price at which a leveraged position is forcibly closed because margin is exhausted.
The firm that routes your orders to the market and holds your account.
The total market value of a position — size multiplied by price.