Variation Margin


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.

BREAKING DOWN '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.

  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Intraday

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

    An agency or separate corporation of a futures exchange responsible ...
  5. Clearing

    The procedure by which an organization acts as an intermediary ...
  6. Leverage

    1. The use of various financial instruments or borrowed capital, ...
Related Articles
  1. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  2. Investing Basics

    Explaining the Liquidity Preference Theory

    According to the liquidity preference theory, investors demand interest in return for sacrificing their liquidity.
  3. Options & Futures

    Ultra ETFs Are Not Your Father's ETFs

    Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
  4. Active Trading Fundamentals

    How to Trade Dow Jones Future Contracts

    Learn about the Dow Jones Index futures contracts available and obtain step-by-step instruction on how to trade the stock index futures.
  5. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  6. Options & Futures

    The Top 4 Equity Proxies For the Futures Markets

    Futures markets have highly liquid equity proxies for nearly all major contracts, offering greater choices for traders and investors.
  7. Mutual Funds & ETFs

    Top 3 Inverse Volatility ETFs

    Learn about four inverse volatility ETNs and ETFs, and understand how the CBOE VIX indicator is calculated and used to hedge a portfolio.
  8. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  9. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  10. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  1. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  5. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center