Margin is the first concept every futures trader needs to understand, because it answers two critical questions: how much money you need to control one contract, and how much you can lose when the market moves against you.
Margin in futures trading is a good-faith performance bond, not borrowed money. It is the deposit you post with your broker to open and hold a position, and it represents only a fraction of the contract’s full notional value. That small deposit is what creates leverage, amplifying both potential profits and potential losses.
In this guide, we explain in plain English how margin works in the US futures market: the difference between initial and maintenance margin, how daily mark-to-market and margin calls work, how margin relates to leverage, and how exchanges and regulators such as the CFTC, NFA, and CME Group fit into the picture.
What Is Margin in Futures Trading?
Margin in futures trading is the amount a trader deposits with a broker or Futures Commission Merchant (FCM) to open and maintain a futures position. Also known as a good-faith performance bond, margin is collateral that ensures you can cover potential losses on your trade. It is not a loan, not a trading fee, and it does not give you ownership of the underlying asset. Instead, margin allows you to control a contract with a notional value that is significantly larger than your deposit - for example, a micro E-mini S&P 500 contract with a five-figure notional value may require only a few thousand dollars in margin - which is why futures are both capital-efficient and risky.
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Initial Margin vs Maintenance Margin - The Mechanics
Initial margin is the good-faith deposit made before opening a futures contract. This must be sent to the broker before a trade contract is established. The $1,000 mentioned in the previous instance is the initial margin.
When the position is created, the trader is required to service this margin as the market fluctuates. The trading platform establishes a maintenance margin. The maintenance margin is the threshold amount required for a futures contract position to remain valid. That is, a trader's account equity must not fall below the maintenance margin.
The maintenance margin is usually 90% of the initial margin (85-90% and may vary by broker; always verify your position's margins). Where this is the case, for a $1,000 initial deposit, the initial margin is $1,000 while the maintenance margin is $900. As the market moves, margins fluctuate. For a losing trade, the losses are deducted from your margins. Once the account falls below the maintenance margin, the trader must add more funds to restore the position. For instance, if you incur a $120 loss on your initial $1,000 margin, your account's equity falls to $880, below the $900 maintenance margin, and the clearinghouse will require additional funds to bring your account back to $1,000.
Exchange minimums vs broker "house" margins
The final margin on your position may differ significantly from the values set by clearinghouses such as CME (Chicago Mercantile Exchange) and ICE (Intercontinental Exchange). Clearinghouses set the base margin; however, brokers often impose stricter margins, known as the "house" margin. House margins are usually above the exchange minimum and are a form of risk control. House margins reduce the notional value:margin ratio to protect both the broker and the client.
What Is a Margin Call - and What Happens If You Can't Meet It?
A margin call is the notice a broker sends to a trader when their account equity falls below the maintenance margin, requiring them to restore their margin by depositing more funds or reducing their position.
When in a losing trade, the running losses are progressively deducted from your account's equity (margin). To continue holding a position, a trader must ensure that the account equity does not go below the maintenance margin. When this happens, the broker issues a margin call, and the trader is expected to respond immediately, otherwise they risk being liquidated. Most brokers issue a single margin call and liquidate the position if the trader fails to respond.
When a margin call is issued, a trader can salvage their account by:
- Depositing enough funds to cover the deficit and restore the account to the initial margin.
- Reducing their position to lower the notional value:margin value ratio and slow the losses.
Failure to satisfy a margin call triggers a risk-mitigation process by the broker, which may lead to:
- Forced Liquidation: The broker may unilaterally close open positions without additional warning to curb exposure.
- Post-Call Loss Accumulation: During periods of high volatility, rapid price drops or slippage can cause losses to compound as liquidation orders execute.
- Unsecured Debt (Deficit Balance): If losses exceed the initial deposit, the broker seizes the initial deposit and bills the trader for the remaining negative balance.
Margin vs Leverage - How They're Connected
Margin and leverage often confuse traders and have been used interchangeably in several cases; however, they are completely different. In the previous sections, we used the phrase "notional value:margin ratio"; this ratio is the leverage. While margin is a trader's deposit held by the broker, leverage is the percentage exposure relative to this margin. The margin is the capital that underlies a trader's position, and the leverage is the total exposure per unit of required capital.
Leverage may be expressed mathematically as:
Leverage = Total Contract value / Margin.
For instance, if a trader deposits $1,000 and opens a micro-sized E-mini S&P position worth $10,000:
- Their margin is $1,000.
- The notional value is $10,000.
- The leverage is 10X (10,000 / 1,000), or a 10% margin.
Leverage magnifies a trader's profit by this ratio; however, it also does the same for losses. Depending on the leverage used, losses may accumulate faster in a losing trade. Higher leverage means greater risk, and traders should apply caution when using high leverage.
How Futures Margin Is Set — SPAN, CME & the Exchanges
Clearinghouses (CME, ICE, and others) and exchanges are responsible for setting the margin for futures contracts. The set margin determines the minimum deposit required to trade the associated contract. Set margins fluctuate with market conditions; therefore, the minimum margin for an asset can change over time. Most US clearing houses use the SPAN (Standard Portfolio Analysis of Risk) margining system to set asset margins. SPAN uses an integrated risk and market analysis method to estimate margin requirements for a derivatives portfolio.
The classic SPAN, developed by the CME in 1988, evaluates a portfolio by simulating 16 specific market scenarios (and adjusting for unexpected volatility) to estimate the risk level and compute a minimum margin for the position. This method was modified between 2018 and 2022 to replace the static market scenario with the Historical Value-at-Risk (HVaR) engine. Instead of the 16 market scenarios, the modified SPAN models portfolio behavior across thousands of historical scenarios and may carry different CME margin requirements if downside risk differs from upside risk.
Exchanges and brokers can, however, adjust the base margin set by clearinghouses based on account risk and trade type. This is known as the house margin and provides an extra risk buffer for the broker.
Day-Trading Margin (Intraday Margin)
Day trading margin is a discounted margin requirement offered by brokers to traders who open and hold positions during active market hours, allowing them to trade with a fraction of the standard capital requirement.
The set margin for your futures contract portfolio may differ significantly, depending on how long you hold your position. The standard margin requirements, known as overnight margin, are usually set for traders who hold their position for one or more full trading hours. Day traders (traders who close their positions within or at the end of the daily trading session) are subject to different (often lower) margin requirements, known as intraday or day-trading margin.
Day trading margins are usually lower than overnight margins because day traders are not exposed to overnight risks and often use higher leverage than overnight traders. However, these requirements are only valid if the trader closes their position 15-30 minutes before the end of the daily session. If a trader holds their position beyond the session close, the overnight margin applies.
Intraday margin requirements may differ significantly between brokers; always verify the margins set by your broker. Our Plus500 Futures review breaks down its intraday margin and contract range.
How Margin Works for US Futures Traders - The Regulatory Picture
In the US, futures trading is regulated by the CFTC (Commodity Futures Trading Commission) and self-regulated by the NFA (National Futures Association), with margin minimums set by exchanges such as CME Group.
In the US, futures trading is regulated by the CFTC (Commodity Futures Trading Commission) and self-regulated by the NFA (National Futures Association), with margin minimums set by exchanges such as CME Group.
The CFTC, the NFA, and exchanges set the ground for margins and futures trading in the US, controlling asset custody, margin requirements, and trading procedures.
The CFTC is the federal regulator overseeing US futures markets. It designates and supervises trading platforms, ensuring they comply with the regulatory framework. The CFTC also regulates clearinghouses and oversees how they handle customer deposits. In the US, brokers must hold customers' deposits in segregated accounts, separate from their operating funds.
The NFA operates as a CFTC delegate. It registers and licenses brokers, ensures compliance through regular audits, and enforces the CFTC's rules.
Exchanges and clearinghouses (like CME, ICE, and Cboe) are the primary infrastructure providers for futures traders. They set the base margin requirements, handle deposits and trades, control the trading session schedules, and implement market guardrails.
Together, the regulatory bodies enforce exchange compliance and protect futures traders. Trading through a licensed, regulated broker matters. For US traders, Plus500's US futures arm is one regulated option; see our Plus500 Futures review for its margin schedules, fees, and platform details.
