### CFA Practice Question

A trader started off with \$2,300 in a futures margin account. The initial margin requirement is \$2,000 and the maintenance margin equals \$1,500. If his position loses \$950, the variation margin equals ______.
A. \$500
B. \$650
C. \$950
Explanation: If the value of the account falls below the maintenance margin, the broker issues a margin call to the trader, who must then deposit additional funds with the broker to bring the account up to the initial margin level. This additional deposit is called the "variation margin." In this case, the value of the trader's account has fallen to (\$2,300 - \$950) \$1,350. Hence, he will get a margin call for (\$2,000 - \$1,350) \$650.

User Comment
ticomico Variation Margin = Initial Margin - Current Account
photoshop why use the initial margin amount rather than maintenance margin in calculating the variation margin?
MikeBarlettano i was always taught you must replenish back up the the INITIAL margin posted, not the requirement (which would give you the variation margin)
Will1868 I also thought that the maintenance margin is the right number to use. It is what the broker would require you to have on account after the intitial margin has been deposited.
hl88 Variation margin is referred to futures market. In stock market, margin call will require you to deposit amount equal to maintenance margin - current balance in margin account. In futures market, deposit amount equal to initial margin - current balance in margin account.
copus The trick here is that the trader started with excess margin in his account. He only needed to have 2000 in his account, but he decided to deposit 300 extra to take the balance to 2300. When the margin call comes through, the 2300 is irrelevant - the clearing house only requires the trader to return the account to the stipulated initial margin requirementr level (2000).
boddunah equity margin trading -> you replenish up to maintenance margin.
futures margin --> you replenish up to initial margin.
Insipidity Thank you boddunah!
Lambo83 Incorrect Boddunah. Whether equity or futures you replenish to initial margin
ashish100 god damn it..

idk if boddunah is right nor lambo..

the worst part is i send out futures variation margin payments/receipts all day long 5 days a week.

i gotta figure this shit out soon
ashish100 ahhhh investopedia for the win babyy!! real mvp as always.

So the trader must only make the margin call ONLY IF his position falls below the maintenance margin.

Then he/she/heshe needs to replenish it up to the initial margin requirement.

So maintenance margin acts as a trigger point. Initial margin is where it needs to be filled up to.