Trading & Markets

Margin

Collateral posted to cover potential losses on a leveraged or derivative position.

Initial margin is posted upfront; variation margin settles daily gains and losses on futures.

Why it is a real risk, not an accounting detail. Margin requirements rise exactly when volatility rises - which is when you can least afford to post more. A correct position can be forcibly liquidated because you ran out of cash before you ran out of thesis.

That mechanism is behind most leveraged blow-ups: the trade was right and the financing was not.

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