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. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  2. Clearing

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

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

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

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

    1. Borrowed money that is used to purchase securities. This practice ...
Related Articles
  1. All About Liquid Commodities
    Options & Futures

    All About Liquid Commodities

  2. Curious About Stock Index Futures? Read ...
    Options & Futures

    Curious About Stock Index Futures? Read ...

  3. How to Trade Futures Contracts
    Options & Futures

    How to Trade Futures Contracts

  4. What's the best way to play backwardation ...
    Active Trading Fundamentals

    What's the best way to play backwardation ...

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center