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Margin when entered into a derivative contract
Derivatives derive their value from underlying assets.  This is expressed by the obligation of at least one counterparty to trade with the other counterparty in the future.  These can take on as many combinations as one can dream up as it is a matter of contract. For futures, where two parties are obligated to trade at a specific price at a specific date in the future (one buyer, one seller), if you "short" a future, you have entered into a contract to sell the underlying at the time specified.  If the price of the future moves against you (goes up), you will have to sell at a loss.  The bigger the move, the greater the loss.  You go ahead and pay this as well as a little extra to be sure that you satisfy what you owe due to the future.  This satisfaction is called margin. If there weren't margin, people could take huge losses on their derivative bets, not pay, and disrupt the markets.  Making sure that the money that will trade is already there makes the markets run smoothly. It's the same for shorting stocks where you borrow the stock, sell it, and wait.  You have to leave the money with the broker as well as deposit a little extra to be sure you can make good if the market moves to a large degree against you.