What Is Maintenance Margin? Why Futures Positions Get…
By Tobi Opeyemi Amure
AI summary of the source article
In futures trading, maintenance margin serves as the minimum collateral required to maintain an open leveraged position, differing from the initial margin required to open it. When market movements generate unrealized losses that reduce an account's equity below this required threshold, exchanges can automatically execute partial or complete liquidations. The risk of forced closure increases significantly with higher leverage, which leaves less margin to absorb adverse price moves, and larger position sizes that trigger tiered margin requirements. Crypto derivatives platforms frequently use reference mark prices and margin modes like cross or isolated margin to calculate liquidation triggers.
Why it matters
Understanding maintenance margin and liquidation mechanics is critical for market participants and trading platforms managing risk exposure in leveraged futures and derivatives markets.
Key facts
- Maintenance margin is the minimum equity threshold required to prevent an open futures position from facing forced liquidation.
- Exchanges may use tiered systems that increase maintenance margin requirements as notional position size grows.
- Crypto derivatives platforms often utilize a mark price as a reference to determine liquidation risk and mitigate temporary price spikes.