Margin
Co-Founder•1 min read
Margin is the amount of money a trader or business must deposit with a broker or counterparty to open and maintain a leveraged position — such as a forward, derivative, or FX trade.
It acts as collateral to cover potential losses and ensures both parties can meet their obligations if the market moves against the position. Margin requirements are usually expressed as a percentage of the total trade value.
Example:
A company enters an FX forward worth £500,000 with a 5% margin requirement. It must deposit £25,000 as collateral. If the market moves unfavourably, additional (“variation”) margin may be requested.
Used in:
FX forwards, derivatives, futures trading, and other leveraged financial products.