The word "margin" means two completely different things depending on whether you're trading futures or stocks. In futures, margin is a good-faith deposit — collateral you post to guarantee you can cover potential losses. In equity trading, margin is a loan from your broker, and you'll pay interest on it for as long as you hold the position.
What is margin in trading?
Futures margin is a good-faith deposit — collateral you post to open and hold a futures position. You're not borrowing anything, and you won't pay interest. Equity margin, on the other hand, is a loan from your broker. You borrow money to buy stocks, options or exchange-traded funds (ETFs), and interest accrues on that loan for as long as you hold the position.
Both use the word "margin," but they describe two completely different things. One is collateral; the other is debt. That distinction affects your costs, your risk, and how quickly you might face a margin call.
What is futures margin?
When you open a futures position, you're entering a contract to buy or sell something at a future date. You're not purchasing an asset outright. To prove you can hold up your end of the deal, the exchange requires you to post margin — a deposit that acts as a performance bond.
This margin isn't borrowed money. It's your own capital, set aside as collateral. Because no loan is involved, there's no interest charge. The exchange (not your broker) sets the margin requirement, and that requirement can change based on market volatility.
Futures margin as a good-faith deposit
Think of futures margin like a security deposit on an apartment. You're not paying rent in advance — you're proving you have skin in the game. Both the buyer and seller in a futures contract post margin, which helps ensure neither party walks away from the obligation.
This is where futures margin differs most from equity margin. With futures, you're not borrowing anything, so there's nothing to pay back and no interest accumulating while you hold the position.
Notional value explained
Notional value is the total market value of the underlying asset controlled by a single futures contract. You calculate it by multiplying the contract size by the current price of the underlying asset.
Here's an example: suppose a crude oil futures contract controls 1,000 barrels, and oil is trading at $90 per barrel. The notional value of that contract is $90,000. If the initial margin requirement is $6,300, you're controlling a $90,000 position with $6,300 in collateral — roughly 7% of the contract's value. That ratio is where futures leverage comes from.
What is equity margin?
Equity margin works differently. When you buy stocks or ETFs on margin, your broker lends you a portion of the purchase price. The securities you buy serve as collateral for that loan.
In Canada, the Canadian Investment Regulatory Organization (CIRO) sets minimum margin requirements. Brokers can impose stricter rules, but they can't go below the regulatory floor.
Borrowing money from your broker
With equity margin, you're taking on debt. If you want to buy $10,000 worth of shares and your broker requires 50% margin, you'd put up $5,000 of your own money and borrow the remaining $5,000. The shares you purchase become collateral for the loan.
This is a genuine credit facility. You owe the broker money, and if the value of your holdings drops, your collateral is worth less — which can trigger a margin call.
Interest charges on margin loans
Because equity margin is a loan, interest accrues on the borrowed amount for as long as you hold the position. Rates vary by broker and are typically expressed as an annual percentage applied daily.
For short-term trades, the interest cost might be small. But for positions held over weeks or months, it adds up. Futures traders don't face this cost, since no money is being lent in a futures margin account.
Futures margin vs. equity margin at a glance
The table below summarizes the core differences between futures margin and equity margin:
Feature | Futures margin | Equity margin |
|---|---|---|
| Nature of margin | Good-faith deposit (performance bond) | Loan from broker |
| Interest charges | None | Yes, ongoing |
| Set by | Exchange | Broker (within regulatory limits) |
| Purpose | Collateral to cover potential losses | Borrowing power to buy securities |
| Daily settlement | Yes (mark-to-market) | No |
| Typical leverage | Higher (often 10:1 to 20:1 or more) | Lower (typically up to 2:1) |
| Ownership of asset | No — contract obligation only | Yes — securities are purchased and held |
Initial margin and maintenance margin explained
Both futures and equity markets use the terms "initial margin" and "maintenance margin," but they function a bit differently in each context.
Initial margin requirements
Initial margin is the minimum deposit required to open a position.
Futures: the exchange sets initial margin, typically ranging from 3% to 12% of notional value, depending on the contract and current volatility
Equities: the broker sets initial margin within CIRO guidelines, typically requiring 30% to 50% of the purchase price upfront
Maintenance margin thresholds
Maintenance margin is the minimum account equity you need to keep a position open. If your account falls below this level, you'll receive a margin call.
In futures, maintenance margin is usually slightly lower than initial margin. In equities, CIRO's minimum maintenance requirement is 30% for most listed securities, though brokers may set higher thresholds.
How leverage differs in futures and equity trading
Both margin types create leverage — the ability to control a larger position than your capital alone would allow. But the degree of leverage, and how it's structured, differs significantly.
Leverage in futures contracts
Futures typically offer much higher leverage because margin is a small fraction of notional value. Leverage ratios of 10:1 to 20:1 are common, and some contracts allow even more.
This amplifies both gains and losses. If you're controlling a $90,000 position with $6,300 in margin and the underlying asset moves 1% against you, that's a $900 loss — roughly 14% of your margin. Day trading margin (intraday margin) can be even lower than overnight margin, which increases leverage further during trading hours.
Leverage with equity margin
Equity margin leverage is more constrained by regulation. In Canada, CIRO rules generally allow borrowing up to 70% of the value of eligible securities, meaning a 30% margin requirement.
While equity margin leverage is lower than futures leverage, it still amplifies losses. And unlike futures, interest costs compound the risk over time.
What triggers a margin call
A margin call is a demand from your broker or the exchange to deposit additional funds — or reduce your position — because your account equity has fallen below the maintenance margin threshold. If you don't meet the call, your broker can liquidate your positions without your consent.
Margin calls in futures trading
Futures positions are marked to market daily. At the end of each trading session, gains are credited and losses are debited to your margin account. If your balance drops below the maintenance margin, you'll need to deposit enough funds to restore it to the initial margin level — not just the maintenance level.
Futures margin calls are typically urgent. You may have less than 24 hours to respond, and intraday margin calls are possible if a position moves sharply during the trading day.
Margin calls in equity trading
Equity margin calls occur when your account's equity ratio falls below the maintenance requirement. You typically have 2 to 5 business days to meet the call, though brokers can act sooner in volatile conditions.
Unlike futures, equity margin calls aren't triggered by daily settlement. They reflect the current market value of your holdings relative to your loan balance.
Mark-to-market and daily settlement
Mark-to-market (MTM) is a defining feature of futures trading. At the end of each trading session, your position is revalued based on the closing price. Gains are credited to your account; losses are debited. This happens every day, regardless of whether you close the position.
Here's what that means in practice:
Daily profit/loss settlement: your account balance changes at the end of each trading day based on price movements
No accumulating paper losses: gains and losses are realised incrementally each day, not all at once when you exit
Cash flow implications: you may need to deposit additional funds even if you plan to hold long-term, simply because of day-to-day price swings
In equity margin trading, by contrast, unrealized gains and losses accumulate as paper gains or losses until you sell or face a margin call.
Cross-margining and unified buying power
Some platforms offer cross-margining — sometimes called unified buying power or portfolio margining. This feature allows traders to use existing equity holdings (stocks, ETFs) as collateral for futures positions, without selling those holdings.
Here's how it works: if you hold $50,000 in equities, you may be able to use some or all of that value as collateral to open futures positions, rather than depositing separate cash. This can be capital-efficient, but it comes with risk. If your equity holdings decline in value, the collateral supporting your futures position also declines — which can trigger margin calls on both sides simultaneously.
Not all brokers offer cross-margining. It's typically a feature of more sophisticated trading accounts.
Risks of trading on margin
Both margin types carry meaningful risks. Leverage amplifies gains, but it amplifies losses in equal measure.
Amplified losses
If a futures position has 10:1 leverage, a 5% adverse move in the underlying asset results in a 50% loss on the margin posted. In equity margin trading, losses are amplified relative to your own capital, and interest costs add to the total.
It's possible — particularly in futures — to lose more than your initial deposit if the market moves sharply against you and you can't meet a margin call in time.
Forced liquidation
Brokers and exchanges can close your positions without your consent if margin calls aren't met. This typically happens during volatile markets, when prices are moving against you — often the worst possible time to exit.
You don't get to choose which positions are liquidated or at what price. This can lock in losses that might have been avoided with more time.
Volatility and changing requirements
Margin requirements aren't static. Exchanges and brokers can raise them during periods of high volatility. You might face a margin call not because your position moved against you, but because the required margin increased.
Maintaining a buffer above the minimum margin requirement can help absorb requirement changes.
How to decide which margin type fits your strategy
Choosing between futures margin and equity margin depends on your goals, risk tolerance, and trading style. Here are some factors to consider:
Interest costs: equity margin accrues interest daily — factor this into any return calculation, especially for positions held weeks or months
Risk tolerance: higher leverage means higher potential for both gains and losses
Capital requirements: futures margin can require less upfront capital, but daily mark-to-market means cash flow requires active management
Product access: not all platforms offer both futures trading and margin lending — confirm what your broker supports before building a strategy around it
