Page 23 - Futures Money Machine-Study Session #3

Understanding Futures

Futures Margin Types, there are actually two types …

Initial Margin

Before a futures position can be opened, there must be enough available balance in the
futures trader's margin account to meet the initial margin requirement. Upon opening the
futures position, an amount equal to the initial margin requirement will be deducted from
the trader's margin account and transferred to the exchange's clearing firm. This money is
held by the exchange clearinghouse as long as the futures position remains open.

Maintenance Margin

The maintenance margin is the minimum amount a futures trader is required to maintain
in his/her margin account in order to hold a futures position. The maintenance margin level
is usually slightly below the initial margin.

If the balance in the futures trader's margin account falls below the maintenance margin
level, he/she will receive a margin call to top up his/her margin account so as to meet the
initial margin requirement.