Securities margin is the money you borrow as a partial down payment, up to 50% of the purchase price, to buy and own a stock, bond, or ETF. This practice is often referred to as buying on margin.
Futures margin is the amount of money that you must deposit and keep on hand with your broker when you open a futures position. It is not a down payment and you do not own the underlying commodity.
Futures margin generally represents a smaller percentage of the notional value of the contract, typically 3-12% per futures contract as opposed to up to 50% of the face value of securities purchased on margin.
When markets are changing rapidly and daily price moves become more volatile, market conditions and the clearinghouses' margin methodology may result in higher margin requirements to account for increased risk.
When market conditions and the margin methodology warrant, margin requirements may be reduced.
Initial margin is the amount of funds required by CME Clearing to initiate a futures position. While CME Clearing sets the margin amount, your broker may be required to collect additional funds for deposit.
Maintenance margin is the minimum amount that must be maintained at any given time in your account.
If the funds in your account drop below the maintenance margin level, a few things can happen:
Futures margin is the amount of money that you must deposit and keep on hand with your broker when you open a futures position. It is not a down payment, and you do not own the underlying commodity.
The term margin is used across multiple financial markets. However, there is difference between securities margins and futures margins. Understanding these differences is essential, prior to trading futures contracts.