Margin (Initial & Maintenance)

What Is Margin in Futures Trading?

Margin is the security deposit a trader must post with their broker to enter a futures position. Unlike buying stocks, where the full purchase price is required, the margin system allows trading with only a fraction of the actual contract value.

For example, the E-mini S&P 500 (ES) has a notional contract value of several hundred thousand dollars. However, the required margin is typically only a fraction of that — roughly 4–6% of the contract value. The exact amounts are set by the CME and change regularly.

Initial Margin vs. Maintenance Margin

There are two core margin concepts every futures trader must understand.

Initial Margin

The initial margin is the minimum amount that must be in the account to open a new position. It is set by the exchange (e.g., CME) and can be adjusted based on market volatility.

Current initial margins can be found on the CME website. These values change regularly based on market volatility. As a rule of thumb, micro contracts require roughly one-tenth the margin of the corresponding E-mini contract.

Maintenance Margin

The maintenance margin is the minimum amount that must remain in the account to keep an existing position open. It is typically about 80–90% of the initial margin.

If the account balance drops below the maintenance margin, the trader receives a margin call — a demand to deposit additional funds or close the position.

Intraday Margin

Many brokers offer reduced margin requirements for intraday trading (day trading). These can be as low as $500–$2,000 per contract but apply only during regular trading hours, and positions must be closed before the session ends.

How Does a Margin Call Work?

A margin call occurs when losses from open positions cause the account balance to fall below the maintenance margin.

Example:

1. A trader opens 1 ES contract with an account balance just above the initial margin
2. The market moves against the position
3. The account balance drops below the maintenance margin
4. The broker issues a margin call, requiring the trader to deposit additional funds
5. If funds are not added in time, the broker liquidates the position

Margin and Risk Management

The margin requirement largely determines how many contracts a trader can hold simultaneously. Responsible risk management, however, goes far beyond meeting minimum margin requirements.

Recommended Account Size

Professional traders generally recommend having at least two to three times the initial margin in the account. This creates a sufficient buffer for:

• Normal market fluctuations
• Losing streaks (drawdowns)
• Exchange-imposed margin increases during elevated volatility

Margin Adjustments

The exchange can adjust margin requirements at any time, particularly:

• Before major economic releases (e.g., Non-Farm Payrolls, FOMC decisions)
• During periods of elevated volatility
• During contract expiration and roll periods

Frequently Asked Questions

Is Margin a Loan?

No. In futures trading, margin is a performance bond (security deposit), not a loan. The trader does not borrow money but deposits capital as a guarantee for fulfilling the contract. Unlike margin accounts in stock trading, no interest is charged.

Can I Lose More Than My Margin?

Yes. Margin is only the security deposit, not a maximum loss limit. During extreme market moves (e.g., gap openings), losses can exceed the posted margin. Solid risk management with stop-loss orders is therefore essential.

How Does Margin Differ Between Brokers?

The exchange margin (set by the exchange) is the same for all brokers. However, brokers may charge additional surcharges or offer reduced intraday margins. Intraday conditions therefore vary significantly between providers.

What Happens to My Margin for Overnight Positions?

Positions held overnight are subject to full exchange margin requirements. Traders using reduced intraday margin must ensure their account balance meets overnight requirements before the intraday session ends.