Initial Margin
The exchange-set deposit required to hold one futures contract overnight — much larger than the intraday margins prop traders are used to.
What is Initial Margin?
Initial margin is the performance bond CME requires to open and hold a futures position into a new session. It scales with the contract’s volatility and notional size, and it is the “real” cost of carrying futures exposure — the number that makes overnight holding a capital-intensive activity.
How Initial Margin works
CME sets and adjusts initial margins per product as volatility shifts; brokers can require more. Intraday, brokers offer reduced day-trading margins because positions must close by session end. The gap is enormous: a contract might need $12,000+ to hold overnight but $500 to trade intraday — which is also the economic logic behind prop firms banning overnight holds.
Worked example
One ES contract carries an initial margin in the low five figures. A retail trader with $5,000 cannot hold it overnight at all — but can day-trade it on reduced margin. A funded 50K prop account sidesteps the question entirely: the firm’s flatten rule closes everything before the margin ever applies.
Initial Margin vs related concepts
Side-by-side comparison of Initial Margin against the most commonly confused alternatives.
| Concept | Definition | Category |
|---|---|---|
| Initial Margin this term | The exchange-set deposit required to hold one futures contract overnight — much larger than the intraday margins prop traders are used to. | Fees & Costs |
| Maintenance Margin | The minimum account equity required to keep an existing futures position open — typically 75-90% of initial margin; falling below triggers a margin call. | Futures Mechanics |
| Day-Trading Margin | A reduced margin requirement set by brokers (not exchanges) for positions opened and closed within the same trading session — typically 5-10% of overnight initial margin. | Futures Mechanics |
Why traders fail Initial Margin
Confusing day-trading margin with the real margin. The $500 figure is a broker’s intraday courtesy, not the contract’s capital requirement. Ignoring margin changes — CME raises margins in volatile regimes, which tightens leverage across the industry exactly when markets are most dangerous.
Frequently asked questions about Initial Margin
What is initial margin in futures?
The exchange-set deposit required to hold one contract into a new session. It reflects the contract's risk and is several times larger than intraday day-trading margins.
Why don't prop firm traders worry about initial margin?
Because nearly all futures prop firms require positions flat by session close, positions never reach the overnight stage where initial margin applies. The firm's flatten rule and the margin system solve the same risk.