Initial Margin

In the world of trading, investing or speculating, counterparties to cash and derivatives trades and spread bets are required to deposit an initial margin to a broker or exchange in order to put trades on. The margin is a relatively modest deposit, typically expressed as a percentage of the value of the trade, that gives counterparties full access to markets. Taking positions in markets having paid the initial margin is known as margin trading. It is a highly leveraged method of trading: a 10% margin gives trades 10x leverage. Through the trade’s lifecycle, counterparties may be required to post additional margin to keep the position open, depending on how the underlying market is performing.