entryPrice = 100
contractMultiplier = 50
initialMargin = 6000
maintenanceMargin = 4500
formatCurrency = (value, digits = 0) =>
new Intl.NumberFormat("en-US", {
style: "currency",
currency: "USD",
minimumFractionDigits: digits,
maximumFractionDigits: digits
}).format(value)
formatNumber = (value, digits = 2) =>
Number(value).toLocaleString("en-US", {
minimumFractionDigits: digits,
maximumFractionDigits: digits
})Margin Account
Futures exchanges protect the clearinghouse—and ultimately every trader—by marking positions to market each day. This interactive simulator shows how daily settlement, initial and maintenance margin, and margin calls work together in a single margin account.
Why Marking-to-Market Matters
Daily settlement prevents losses from snowballing. Gains are credited and losses are debited at the close of each day, keeping accounts current with the latest futures price. When an account falls too far, the clearinghouse demands fresh capital before the next trading day.
Key Concepts
- Initial margin: the good-faith deposit required to open the position.
- Maintenance margin: the minimum balance you must keep; dipping below it triggers immediate action.
- Variation margin: the daily gain or loss that is added to or subtracted from your account.
- Margin call: the request to top the account back up to the initial margin level when losses push it below maintenance.
Interactive Margin Account Simulator
Drag the slider to adjust the end-of-day settlement price and watch the account update in real time. Flip the position direction to see how long and short traders experience the same move differently.
Tip
Scenario Set-Up
- Position size: 1 futures contract
- Contract multiplier: $50 per price point
- Entry price: 100.00
- Initial margin: $6,000
- Maintenance margin: $4,500
These numbers resemble a stock index future but are rounded so you can focus on the mechanics.
Set the position and settlement price
Margin account balance
Daily statement
Calculating the Margin Call Trigger Price
A key skill for any futures trader is knowing the price level that will trigger a margin call. We can calculate this “trigger price” directly. A margin call is triggered if the account balance falls below the maintenance margin. The price at which the balance is exactly equal to the maintenance margin is our trigger point.
The maximum unrealized loss the account can sustain before a call is the difference between the initial and maintenance margins:
\[\begin{align*} \text{Allowable Loss} &= \text{Initial Margin} - \text{Maintenance Margin} \\ &= \$6000 - \$4500 \\ &= \$1500 \end{align*}\]
To find the adverse price move that causes this loss, we divide this amount by the contract multiplier:
\[\begin{align*} \text{Price Move to Trigger} &= \frac{\text{Allowable Loss}}{\text{Contract Multiplier}} \\ &= \frac{\$1500}{$50 \; \text{per point}} \\ &= 30 \; \text{points} \end{align*}\]
This 30-point adverse move determines the trigger prices:
For a Long Position: The call is triggered if the price drops 30 points from entry.
\[\text{Trigger Price (Long)} = 100.00 - 30.00 = 70.00\]
A settlement price below 70.00 will trigger a margin call.
For a Short Position: The call is triggered if the price rises 30 points from entry.
\[\text{Trigger Price (Short)} = 100.00 + 30.00 = 130.00\]
A settlement price above 130.00 will trigger a margin call.
You can verify this by setting the settlement price just below 70 (for long) or just above 130 (for short) in the simulator.
What to Experiment With
- Set a long position and slide the settlement price lower to feel how losses quickly lead to a call.
- Flip to a short and observe how rising prices create the same pressure.
- Notice that every $1 move in settlement triggers $50 of variation margin per contract.
- Find the settlement price where the account balance exactly touches maintenance.
Takeaways
Marking-to-market keeps futures exposures transparent and contained. The margin account balance increases with favorable price moves and decreases when the market turns against the position. If the balance drops below the maintenance level, the resulting margin call requires an immediate infusion of cash to restore the initial margin. Failure to meet the call forces liquidation of the position, protecting the clearinghouse from default and containing systemic risk.