Initial vs maintenance margin in futures
Explain initial margin, maintenance margin, and how margin calls work in a futures account.
Lesson path
Futures, Indices, and Commodities
Futures Basics
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Explain initial margin, maintenance margin, and how margin calls work in a futures account.
The two margin numbers you must know
If you came from stock trading, the word 'margin' probably means 'money the broker lends you to buy more stock.' Forget that definition for futures. In futures, margin is not a loan. It's a good-faith performance deposit — a chunk of cash the exchange requires you to post to prove you can cover potential losses on the position you just opened.
Two numbers matter: initial margin is the amount you need to have in your account to open a new position. Maintenance margin is the lower threshold you have to stay above to keep the position open. Both numbers are set by the exchange (with the broker often requiring a bit more — known as 'house margin'). They're published per contract and updated periodically based on volatility. For Micro E-mini S&P (MES), initial margin is typically around $50 to $100, and maintenance is around $40 to $80. For standard ES, initial is around $13,000 to $15,000.
What happens if your equity drops below maintenance? You get a margin call. That's a notification (and a legal demand) to either deposit more cash or reduce your position size so you're back above the maintenance threshold. Modern retail brokers will auto-liquidate before the call escalates — meaning the system closes your positions for you to bring equity back above maintenance, sometimes with little warning. The market doesn't wait. If your account is small and a contract moves against you fast, an auto-liquidation can hit before you can react.
Practical rule for a $500 account: never run close to margin. If MES initial is $50 to $100 and your account is $500, you technically have room for 5-10 contracts — but that's reckless because a small move would wipe you out. The right approach is to size by risk per trade (covered in lesson three), not by maximum margin available. Treat margin as a hard floor you stay well above, not a target you push toward.
Recap: margin is a deposit, not a loan. Initial gets you in, maintenance keeps you in. Below maintenance = margin call or auto-liquidation. Size by risk, not by margin available.
Knowledge check
Answer before moving on.
1. Why is futures margin different from stock margin?
2. What happens if your account equity drops below the maintenance margin level?
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