What is the meaning of initial margin and variation margin

Question

Accepted Answer

Initial margin is the collateral required to open a position, while variation margin is the daily settlement of gains and losses.

Initial margin is the amount of collateral required to open a position in a financial transaction.
Variation margin is the daily settlement of gains and losses to ensure that the account maintains the required margin level.
Initial margin helps protect against potential losses, while variation margin ensures that losses are covered in real-time.
Example: In futures trading, initial margin is deposited when opening a position, and variation margin is exchanged daily based on price movements.

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