Initial margin refers to the initial collateral deposit required to enter a trade. It acts as a form of protection for both parties involved. By ensuring sufficient funds or assets are available, initial margin mitigates the risk of potential losses due to adverse price movements. It promotes the stability and integrity of the trading system, reducing the likelihood of defaults. The specific amount of initial margin is determined by factors such as instrument volatility and liquidity, helping to safeguard the interests of market participants.
