What's the difference between initial margin and maintenance margin?

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AcadiFi · Accepted Answer

Initial margin is the good-faith deposit required to open a futures position. Maintenance margin is the minimum balance required to keep it open. If the account falls below maintenance, the broker issues a margin call demanding you restore the balance back up to the initial margin level (not just to the maintenance threshold). Example: Assume initial margin $6,000 and maintenance $4,500 on an E-mini contract. A trader named Koa Mahelona deposits $6,000 and goes long one contract. Over two sessions the position loses $1,800, leaving $4,200 in the account. Because $4,200 is below the $4,500 maintenance floor, the broker issues a variation margin call for $1,800, restoring the balance to the $6,000 initial level. ```mermaid flowchart TB A[Deposit Initial
Margin $6000] --> B[Daily MTM
Updates Balance] B --> C{Balance
below $4500?} C -->|No| B C -->|Yes| D[Margin Call
to $6000] D --> E[Pay or
Liquidate] ``` Key points: - Margins are set by the exchange/clearing house, and brokers can add house margin on top. - Initial margin typically covers about one standard-deviation daily move — clearing houses use models like SPAN to calibrate. - Maintenance is usually 70–80% of initial. - Unlike equity margin loans, futures margin is performance bond, not borrowing — no interest accrues. Ignoring maintenance can force liquidation at the worst moment, so well-run traders keep a buffer well above maintenance. The two-tier system prevents constant small top-ups while still collateralizing most of the expected one-day risk.

What's the difference between initial margin and maintenance margin?

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