Margin on the Series 3.

Margin is one of the most tested — and most misunderstood — topics on the Series 3. The key: futures margin is not a loan. It's a good-faith deposit that guarantees performance on the contract.

Futures margin vs. stock margin

In stocks, "buying on margin" means borrowing money to buy shares. In futures, margin is a performance bond — a small deposit (often a few percent of contract value) that both the buyer and the seller post. No one is lending you anything, and there's no interest charged on it. This distinction shows up constantly.

Initial vs. maintenance margin

• Initial margin — the amount you must deposit to open a position.
• Maintenance margin — the minimum equity you must keep to hold it (lower than initial).

What triggers a margin call

Futures are marked to market daily. If losses pull your account equity below the maintenance level, you get a margin call — and you must deposit enough to bring the account back to the initial margin, not just to maintenance. This top-up is called variation margin.

Quick example

Initial margin is $3,000 and maintenance is $2,200. Losses drop your equity to $2,000 — below maintenance. You get a margin call and must deposit $1,000 to restore the account to the $3,000 initial level.

Who sets it

Exchanges set minimum margins (often via a risk-based system), and brokers can require more. Because margin controls leverage, it's central to both the risk-disclosure rules in Part 2 and the mechanics in Part 1.

Drill margin-call questions until the "restore to initial" rule is automatic — try the free practice questions.