Margin Requirements

Futures trading uses margin accounts, requiring you to deposit money, known as the initial margin or “performance bond”, to establish and maintain a futures position. This margin covers potential losses and enables significant leverage, amplifying both gains and losses. Unlike a loan, futures margin is your own money at risk. Margin requirements fluctuate with market volatility, so monitor your account closely.

Initial Margin

The initial margin is the amount of capital required to enter a position. It represents a fraction of the total value of the futures contract, often ranging from 3% to 15%, depending on the contract’s historical price volatility. Exchanges set these requirements based on the volatility of the underlying asset.

Maintenance Margin

Once you hold a position, you must maintain a certain level of equity in your account, known as the maintenance margin. This ensures you can cover potential losses. If your account falls below this level, you will receive a margin call and must deposit additional funds to maintain your position.

Leverage

Margins allow you to control a large position with a relatively small amount of capital, similar to securities-based margin. This leverage can lead to significant gains or losses from small market moves, especially during volatile periods.

Broker and Exchange Roles

Exchanges set the minimum margin requirements, but brokers can require higher amounts. They cannot, however, require less than the exchange minimum. This is not merely convention. Under Core Principle D of the Commodity Exchange Act ( 7 U.S.C. § 7a-1(c)(2)(D)), the margin a derivatives clearing organization requires “shall be sufficient to cover potential exposures in normal market conditions,” and each model and parameter used to set it must be risk-based and reviewed on a regular basis. The implementing regulation puts numbers on that: margin must be set at a confidence level of at least 99% (17 CFR § 39.13(g)(2)(iii)), assuming a minimum one-day liquidation period for futures and options (§ 39.13(g)(2)(ii)), with the model reviewed and validated annually by a qualified and independent party (§ 39.13(g)(3)). Margin is a risk model output, not an arbitrary exchange price.

Portfolio-Based Margining

Futures margin is not computed contract by contract. Clearing houses use portfolio risk models — CME’s SPAN and its successor SPAN 2 — that simulate your entire position set across a grid of price and volatility scenarios and charge you the worst plausible outcome. The practical consequence is large: a calendar spread or a hedged pair margins at a small fraction of the two outright positions, because the model recognizes the offset. Structure positions as recognized spreads where you can.

Margin Adjustments

Margin requirements can change, especially during periods of high market volatility. Track them, or the margin call is the notification.

Position Management

To buy or sell a contract during regular trading hours, you must have the intraday initial margin available in your account. Once you own the position, the requirement drops to the intraday maintenance margin. If you choose to maintain the position overnight, the margin requirement increases to the overnight maintenance margin. Different futures contracts have different intraday end times, which can be found on the exchange’s website. If your account lacks the required overnight margin, the contract will be forcibly closed.

Keep up-to-date with changes in margin requirements and market conditions. Exchanges and brokers often update these based on market volatility. Know the intraday and overnight margin requirements for your contracts. Ensure your account has sufficient funds to avoid forced closures.

Two differences from securities margin that catch people out. First, futures margin carries no interest. A securities margin loan is genuine borrowing and the broker charges you for it; a futures performance bond is your own collateral, which in most accounts continues to earn interest while it sits there. That is why the embedded leverage in futures is cheaper than a margin loan, and it is the foundation of the financing trade in section “Fixed-Income Futures”.

Second, there may be no call at all. The customer agreement you signed authorizes the broker to liquidate positions immediately, without notice and without waiting for you to wire funds, when equity falls below maintenance. The “margin call” that arrives by email is an operational courtesy, not a legal entitlement. In a fast market you will learn your position was closed after it was closed. Do not size a futures position on the assumption you will get a chance to defend it.

Capital efficiency To establish an equity position in a margin account, you must pay at least 50% of its full value — Regulation T, 12 CFR § 220.12. Commodity futures fall outside Regulation T entirely, which is why the initial requirement is a single-digit to mid-teens percentage of notional instead. Leverage allows you to use your capital more efficiently and potentially generate larger returns relative to your investment. However, it also magnifies losses more quickly and with smaller market movements, risking losses that exceed your initial investment — a futures account can go negative, leaving you owing the broker money you never deposited.