Initial Margin
The minimum amount of capital required to open a leveraged securities or futures position.
What is Initial Margin?
Initial margin is the upfront deposit or collateral required to open a leveraged trading position. In the U.S. equity markets, Regulation T (set by the Federal Reserve) requires investors to deposit at least 50% of the purchase price when buying securities on margin—meaning a $10,000 stock position requires at least $5,000 in cash or marginable securities. For futures contracts, initial margin requirements are set by the exchange (e.g., CME) and are typically 3–15% of the contract's notional value, reflecting the expected daily price volatility of the underlying asset. If the position's value falls and the account equity drops below the maintenance margin threshold, the broker issues a margin call requiring the investor to deposit additional funds. Initial margin protects both the broker and the clearinghouse against default risk if prices move against the leveraged position.
Example
An E-mini S&P 500 futures contract (notional value ~$260,000) has a CME initial margin requirement of approximately $13,200—about 5% of notional value. A trader who deposits $13,200 can control $260,000 in stock market exposure. A 1% adverse move in the S&P 500 would generate a $2,600 loss, reducing the account by 20%—illustrating the amplifying effect of futures leverage.
Source: CME Group — Margin Requirements