Initial margin: why a position can be closed without you
beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
Opening a position on the derivatives market does not require paying the asset's value. It requires posting initial margin — collateral covering the possible loss.
Who demands it
The central counterparty: it guarantees settlement and must therefore be confident that each side can pay — The central counterparty: why you can trade with a stranger.
The size is not constant
Margin depends on an instrument's volatility. When swings grow the requirement rises — and it rises precisely when the market is moving sharply, that is, when you are already down.
Forced closure
If the account lacks funds to cover the margin, the broker closes the position by force, at the current price. Your opinion about the position's prospects is not consulted.
Why sitting it out does not work
Variation margin is debited daily. Even if you are right in substance and the price comes back, the account can reach zero before that happens.
That is the fundamental difference from owning a share: there the drawdown stays on paper until you sell.
The practical conclusion
Position size on the derivatives market is measured against the full contract value, not against the margin posted. Otherwise the risk turns out several times larger than assumed — How to assess the risk of a position, step by step.
Related: Futures: an obligation, not an option.
Related instruments
Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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