Derivatives

Margin

Margin is the collateral you deposit and lock up to open and maintain a leveraged position — it's returned (minus any losses) when the position is closed.

Exchanges distinguish initial margin (what's required to open a position) from maintenance margin (the minimum that must remain for the position to stay open). Falling below maintenance margin triggers liquidation.

For example, opening a $10,000 position with $1,000 of margin at 10x leverage means the position must stay above whatever maintenance margin level the exchange sets — say $500, or 5% of the position — or it gets force-closed.

A common mistake is confusing 'margin' with 'a fee.' Margin is your own collateral, not money paid to the exchange — but it can be partially or fully lost if the trade moves against you far enough before you close it.

Related terms

Leverage Liquidation Perpetual futures

See it in practice

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