Variation Margin

AAA

DEFINITION of 'Variation Margin'

A variable margin payment that is made by clearing members to their respective clearing houses based upon adverse price movements of the futures contracts that these members hold.

INVESTOPEDIA EXPLAINS 'Variation Margin'

Variation margin is paid by clearing members on a daily or intraday basis in order to reduce the exposure created by carrying highly risky positions. By demanding variation margin from its members, clearing organizations are able to maintain a suitable level of risk and cushions against significant devaluations.

RELATED TERMS
  1. Clearing

    The procedure by which an organization acts as an intermediary ...
  2. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  3. Intraday

    Another way of saying "within the day". Intraday price movements ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  6. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
Related Articles
  1. Stock Safety: Top 3 Ways to Limit Your ...
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your ...

  2. Can You Buy Stock Insurace? 3 Strategies ...
    Options & Futures

    Can You Buy Stock Insurace? 3 Strategies ...

  3. How The Price Of Stock Futures Is Calculated
    Options & Futures

    How The Price Of Stock Futures Is Calculated

  4. Futures, Derivatives and Liquidity: ...
    Options & Futures

    Futures, Derivatives and Liquidity: ...

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center