What’s a futures margin call?

A futures margin call is a notification from your broker indicating that the value of your account has fallen below the minimum margin requirement needed to maintain your open futures positions. When you trade futures, you're required to deposit a certain amount of money, known as the initial margin requirement, which acts as collateral. As the market moves, the value of your position fluctuates, and if it moves against you enough, your account balance can drop below the maintenance margin—the minimum amount required to hold the position. When this happens, a margin call is issued. (Note: At Robinhood Derivatives the initial margin and maintenance margin are the same amount).

Margin calls occur partly because futures positions are highly leveraged, meaning a small move in the market price can lead to substantial gains or losses for your position. If the market moves against your position and your account balance dips below the maintenance margin requirement, your broker will require you to restore the account to the initial margin level. This is done to ensure that there are enough funds in your account to cover potential losses. While margin calls are common, they indicate that the position has incurred losses, so it’s a warning sign that you may need to reassess your strategy or manage risk more effectively.

When you receive a margin call, you can resolve it by either depositing additional funds or reducing your futures positions to restore your account balance. Additionally, your position may appreciate in value to bring your account balance back to the initial margin requirement, however this may not be the best choice as you have no control over the market. If no action is taken, your broker may liquidate part or all of your position to meet margin requirements. Many brokers, including Robinhood, issue what’s called a margin call and then a past-due margin call the next day if the first margin call isn’t met. These statuses help manage margin calls and may result in your account being set to “position closing only” until the call is met.

While margin calls are common, they’re no fun. The good news is that they can often be avoided with proper risk management, such as monitoring positions, using stop-loss orders, and keeping extra funds in your account. While margin calls can be unpleasant, they’re no reason to panic. Most brokers, including Robinhood, provide customer support to help you manage and satisfy a margin call in a timely manner.

Example

Spencer opened his account with $1,600, just enough to meet the $1,500 initial margin requirement for trading 1 Micro E-mini S&P 500 future. Unfortunately, after a string of tough market moves, his account balance dropped to $1,400, triggering a margin call. Since his broker holds the initial margin and the maintenance margin at the same amount, Spencer needed to quickly bring his balance back up to $1,500 to maintain his position, or risk having it liquidated.

Realizing the gravity of the situation, Spencer took it seriously but didn’t panic. He knew he had two clear options: either deposit additional funds or exit his position. After a quick assessment, he decided to add $200 to his account, bringing his balance back to $1,600. This allowed him to stay in the trade, and luckily, the market recovered shortly after. He walked away from the experience with a deeper understanding of how to manage his risk and respect the power of margin. Going forward, Spencer chose to add more cash to his account, giving his positions more room to fluctuate, thus reducing the risk of another margin call.

The initial margin requirement is the amount of money you need to set aside to open a futures position. Both the buyer and seller are required to put up a good-faith deposit, called a margin requirement. Think of it like collateral—the buyer and seller are putting up “skin in the game.” When the position is closed, the margin requirement is returned, plus or minus any gains or losses and net of commissions and fees. At Robinhood, the initial margin requirement is simply listed as ‘Margin requirement’ in the app.

The maintenance margin requirement is the minimum amount of cash that you must maintain in your account to keep an open futures position. At many brokers, it’s typically lower than the initial margin required to open a trade and serves as a threshold to ensure that traders have enough funds to cover potential losses. At Robinhood Derivatives, however, the maintenance margin is equal to the initial margin requirement and is simply labeled as ‘Margin requirement’ in the app.

If your account balance falls below the maintenance margin due to adverse market movements, your broker will issue a margin call, requiring you to bring the account back above the initial margin requirement. If you don’t meet this requirement, your broker may liquidate the position to limit further losses. Remember, maintenance margins are designed to protect both you and your broker by ensuring that there is sufficient collateral to cover potential losses.

If the value of your account falls below the required margin amount, you’ll likely be issued a margin call at the start of the next trading day (which is typically 5 p.m. CT). Remember trading days aren’t the same as calendar days for futures. To satisfy the margin call you must either deposit funds to cover the call, liquidate some or all of your position, or it happens that your position appreciates back in your favor enough to fully satisfy the call. The margin call will be met once sufficient funds are reflected in your account balance. Please note, the call is only satisfied if the position appreciates above the margin requirement at the end of the trading day when your position is marked to market. Also, if you take action–like depositing additional funds–the margin call might not resolve on the same day.

If a margin call isn’t satisfied on the same day it’s issued, it becomes “past due” on the following trading day. If a past-due futures margin call isn't satisfied by 3:00 p.m. CT on the second trading day, your broker will likely liquidate enough contracts to bring the account back above the required margin. Typically, your broker will only liquidate the minimum number of contracts needed to cover the deficiency. It’s imperative to understand your broker’s policies and procedures before trading futures. To view Robinhood’s margin call policies see here.

A futures margin call can be satisfied in the following ways:

• Deposit funds: The quickest and simplest method is by depositing funds to cover the deficit.
• Close some or all of your position: Another option is for you to liquidate enough futures contracts to bring the account balance above the margin requirement for the remaining positions held at the close of the trading session.
• Appreciation: Lastly, the call may be met through an appreciation in the position that brings the account back to the initial margin requirement at the end of the trading day. Note: this typically isn’t the best way to meet a margin call because it requires the market to move back in your favor; something that you have no control over.

Position closing only refers to a restriction placed on your account that prevents you from opening new positions. In this state, you’re only allowed to close or reduce existing positions and can’t initiate any new trades until the restriction is lifted. This restriction is typically applied when an account fails to meet a margin call in a timely manner, among other reasons.

While margin calls can’t be completely avoided, there are steps you can take to reduce the risk of receiving one. First and foremost, it’s best to focus on proper risk management and maintain sufficient capital in your trading account. One of the most effective strategies is to keep a cushion of funds well above the minimum margin requirement. While the amount varies from one trader to another, some traders deposit 2x, 3x, 5x, or even 10x the margin required to trade a contract. By maintaining an adequate buffer, you can better withstand market fluctuations without your account falling below the margin threshold. While this requires you to deposit more money, this extra capital provides flexibility, reducing the likelihood of a sudden margin call due to short-term volatility,

Additionally, you should regularly monitor your positions and be prepared to adjust or close them if the market moves against you. One tool for potentially avoiding margin calls is the use of stop-loss orders. These orders close a position if it reaches a predetermined price level, limiting potential losses. By incorporating stop-loss orders, you can protect your account balance from large, unexpected swings. While useful, stop-loss orders also have limitations. For example, in fast-moving or volatile markets, stop orders may experience slippage, meaning the trade could be executed at a worse price than expected, potentially increasing losses. Additionally, in extremely illiquid conditions, a stop order may not be filled, leaving the position open and exposed to further adverse price movements.

Overall, staying disciplined, properly managing risk, and keeping a close eye on your positions and account balances are crucial steps in reducing the likelihood of receiving a margin call.

Futures margin calls are an unfortunate but necessary part of the trading process. A futures margin call happens when your account falls below the required margin due to losses on a position. Traders must either deposit funds, liquidate positions, or it happens that the market moves to meet the margin requirement. Significant losses that trigger margin calls should prompt a strategy reassessment. To avoid margin calls, maintain an adequate cash buffer above the margin requirement, consider using stop-loss orders, and monitor your positions closely. Ultimately, effective risk management helps reduce the likelihood of margin calls and keeps your futures trades on track.