Margin is the feature that makes futures both powerful and dangerous. It allows a trader to control a contract worth tens or hundreds of thousands of dollars with a much smaller deposit. Understanding exactly how margin and leverage work is not optional; it's the difference between a manageable loss and a devastating one.
What futures margin is, and isn't
In stock trading, "buying on margin" means borrowing money to buy shares. Futures margin is different. CME Group describes it as the amount you must deposit and keep on hand with your broker when you open a position. It is not a down payment, and you don't own the underlying asset. It's a performance bond that shows you can cover daily losses.
According to CME Group, futures margin typically runs about 3 to 12 percent of a contract's notional value. That small percentage is where leverage comes from.
Initial margin vs. maintenance margin
| Term | What it means |
|---|---|
| Initial margin | The amount required to open a position. For CME products, the exchange minimum is set by CME Clearing; your broker may require more. |
| Maintenance margin | The minimum balance your account must keep while the position is open. It's lower than initial margin. |
| Margin call | A demand to deposit more funds when your account falls below maintenance, usually to bring it back to the initial level. |
Margins change
Requirements rise when markets get volatile and can fall when conditions calm. We don't list specific margin dollar amounts on this site because they go out of date. Always check current figures on the exchange's website and with your broker before trading.
Leverage, worked out with real numbers
Let's use round, hypothetical numbers to see how leverage works. Suppose:
- The S&P 500 index is at 5,000.
- One E-mini S&P 500 contract ($50 × index) has a notional value of 5,000 × $50 = $250,000.
- Your broker requires $12,500 in initial margin (an illustrative figure, 5% of notional).
Your leverage is $250,000 ÷ $12,500 = 20 to 1. Every 1% move in the index changes the contract's value by $2,500, which is 20% of your margin.
| Index move | Points | Gain or loss (1 contract) | As % of $12,500 margin |
|---|---|---|---|
| +1% | +50 | +$2,500 | +20% |
| −1% | −50 | −$2,500 | −20% |
| −3% | −150 | −$7,500 | −60% |
| −5% | −250 | −$12,500 | −100% |
A 5% drop, which stock indexes have experienced in a single day, would wipe out the entire margin deposit. A larger or faster move could push the account below zero.
How a margin call plays out
Because futures are marked to market daily, losses come out of your account every day. Here's an illustrative sequence with simple numbers:
- Day 1. You deposit $12,500 (initial margin) and buy one contract. Maintenance margin is, say, $11,000.
- Day 2. The market falls and your account is debited $2,000. Your balance is $10,500, below maintenance.
- Margin call. You're asked to deposit $2,000 to bring the account back to $12,500, or reduce your position.
- If you don't act, your broker may close the position, possibly at a worse price, and may do so without waiting for you.
In fast markets, brokers can liquidate positions intraday when equity drops too far. Read your broker's margin policy in full.
Why losses can exceed your deposit
Margin is the minimum you must post, not the maximum you can lose. If prices gap sharply, overnight or on major news, a position can lose more than the account holds before anyone can close it. You are responsible for the deficit. The CFTC warns that futures traders can be required to pay more than they initially invested and advises knowing how much you can afford to lose beyond your initial investment.
Managing leverage sensibly
You can't remove leverage from futures, but you can control how much you actually use:
- Fund the account well above the margin minimum. Holding only the minimum means a small move triggers a margin call.
- Size by risk, not by margin. Decide how much you're willing to lose on a trade first, then calculate how many contracts that allows. See Position sizing.
- Consider smaller contracts. Micro futures are one-tenth the size of many standard contracts, so every tick costs one-tenth as much.
- Know your effective leverage. Divide total notional value of your positions by your account equity. That number tells you how much a 1% move will hurt.
- Plan for gaps. Stop orders help, but they aren't guaranteed to fill at your price in a fast market.
The beginner trap
Low day-trading margins make it possible to open large positions with a small account. That's not an invitation; it's the most common way new traders lose money fast. Leverage available is not leverage advisable.
Measuring your real leverage
Margin tells you the minimum you must deposit. It doesn't tell you how leveraged your account actually is. For that, divide the total notional value of your open positions by your account equity.
Example: a $25,000 account holding one Micro E-mini S&P 500 contract with the index at 5,000 controls $25,000 of exposure, so effective leverage is 1 to 1. The same account holding one E-mini controls $250,000, or 10 to 1. A 2% market move would change the first account by 2% and the second by 20%. Use our margin and leverage calculator to see this for your own numbers.
Before you trade
Futures are leveraged. A small price move can produce a large gain or loss, and losses can exceed the money in your account. This article is general education, not a recommendation to buy or sell any contract.
- Practice in a simulated (paper) account before using real money.
- Decide your maximum loss per trade before you enter, and size positions to it.
- Confirm current contract specifications and margin requirements with the exchange and your broker.
Common questions
Who sets futures margin requirements?
The exchange's clearinghouse sets the minimum initial margin (for CME products, CME Clearing). Your broker can require more than the exchange minimum, and both can raise requirements quickly when markets become volatile.
What are day-trading margins?
Some brokers offer lower margins for positions opened and closed within the same session. They're set by the broker, not the exchange, and they increase leverage. Lower margin does not mean lower risk.
What happens if I can't meet a margin call?
Your broker may reduce or close your positions, possibly at a loss and without waiting for you. If the account goes negative, you owe the deficit.
Sources
- Margin: Know What's Needed — CME Group Education. www.cmegroup.com/education/courses/introduction-to-futures/margin-know-what-is-needed.html
- Mark-to-Market — CME Group Education. www.cmegroup.com/education/courses/introduction-to-futures/mark-to-market.html
- Futures Market Basics — U.S. Commodity Futures Trading Commission. www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/FuturesMarketBasics/index.htm
- Investor Education & Resources — National Futures Association. www.nfa.futures.org/investors/investor-resources/index.html
Last reviewed October 17, 2026. Educational content only; not investment advice. Contract specifications and margins change, so confirm current figures with the exchange and your broker. See our risk disclosure.
