Futures Margin and Daily Settlement
Futures margin is a performance bond, not a loan. Positions settle in cash every day, which means a losing position consumes cash before it is closed.
MadStockAlerts Research · Updated August 29, 2026
What to take away
- Initial and maintenance margin are set by the exchange and raised by brokers.
- Nothing is borrowed, so there is no interest on the position.
- Positions are marked to market daily and cash moves accordingly.
- A margin call in futures must generally be met the same day.
- Requirements are raised in volatile conditions, sometimes sharply.
MAD Academy Training Video · 0:46
Settled Every Single Day
Futures gains and losses move in cash daily, which means a position can be closed out long before your view is proved right.
This lesson is part of a Stock Alerts + Tools plan.
Margin here means something different
| Equity margin | Futures margin | |
|---|---|---|
| What it is | A loan against securities | A performance bond |
| Interest | Charged on the borrowed balance | None, since nothing is borrowed |
| Typical initial requirement | Around 50 percent of the position | Often a few percent of the notional |
| Who sets it | Regulation, then the broker | The exchange, then the broker |
| Time to meet a call | Usually days | Frequently the same day |
The absence of interest is not a benefit in disguise. It follows from the fact that no money was lent: the contract is an agreement rather than a purchase, and the margin is collateral against the obligation.
Daily settlement
- 1The session closesThe exchange establishes a settlement price for each contract.
- 2Every position is markedThe change in value since the previous settlement is computed.
- 3Cash movesGains are credited and losses debited, in cash, that day.
- 4The position continuesAt the new settlement price, with the previous days' results already realised.
This is the mechanism that keeps counterparty risk out of the system: no obligation accumulates over the life of the contract, because it is settled daily. It also means an adverse move produces a cash outflow immediately rather than at exit.
A position that is eventually correct can therefore fail on the way. Sustained adverse moves consume cash daily, and an account unable to meet those flows is closed out regardless of what happens afterwards.
- 1The session closesThe exchange sets a settlement price
- 2Every position is markedAgainst the previous settlement
- 3Cash moves that dayGains credited, losses debited, in cash
- 4The position continuesAt the new price, with the day's result already realised
Requirements change
Exchanges adjust margin requirements in response to volatility, and brokers add their own margins above the exchange minimum. Both can change with limited notice.
- Requirements typically rise in volatile conditions, which is when positions are already under pressure.
- An increase applies to existing positions, not only to new ones.
- Brokers frequently raise requirements ahead of weekends, holidays and major scheduled events.
- Day-trading margin, offered intraday, reverts to the full overnight requirement at the close.
The first two combine into a specific failure mode. A volatile period raises requirements while positions are losing, so the capital needed rises exactly as the capital available falls.
Sizing against notional
Because margin is a small fraction of notional, sizing by margin produces enormous exposure. The correct anchor is the notional value and the contract's typical daily movement.
daily value at risk per contract ≈ multiplier x typical daily point move
- a contract with a $50 multiplier moving 40 points on an ordinary day moves $2,000
- that figure, not the margin, is what a position size should be assessed against
Micro and mini contracts exist on many underlyings specifically to make smaller position sizes possible. They are the same exposure at a smaller multiplier, which is a sizing tool rather than a different instrument.
Limits and halts
Many futures contracts have daily price limits: a maximum move from the previous settlement, beyond which trading is restricted or halted for a period.
- A limit move halts or restricts trading, which means a position cannot be exited at any price for that period.
- Limits are frequently expanded on subsequent days, allowing a larger move each session.
- A market can move several limit sessions in one direction, with no opportunity to exit in between.
- Losses accrue daily through settlement regardless, so cash is being consumed while the position cannot be closed.
The third and fourth items combine into the specific failure mode of leveraged futures positions. The exit is unavailable exactly when it is needed, and the daily settlement continues to draw cash from an account that cannot act.
Limits exist to slow disorderly moves and they do not prevent them. They redistribute a large move across sessions, which is useful for the clearing system and is the opposite of useful for a holder trying to get out.