What Is the Difference Between Initial Margin and Maintenance Margin?
Borrowing to buy securities involves two separate numbers that sound alike but do different jobs — one governs getting into a position, the other governs staying in it.
The short answer
Initial margin is the minimum amount of an investor’s own money required to open a leveraged position, expressed as a percentage of the purchase. Maintenance margin is a separate, generally lower threshold — the minimum equity that must remain in the account, as a percentage of the position’s current value, for as long as the position stays open. The first is a one-time entry requirement; the second applies continuously and can trigger action even without any new trading.
How the entry requirement works
When opening a position on margin, a broker requires a portion of the purchase price to come from the investor’s own funds, with the rest borrowed. That portion is the initial margin requirement, and it’s set with a floor by a federal rule that applies broadly across brokers, though individual firms can require more. This requirement is checked at the moment of the trade — once the position is opened at the required level, the initial margin calculation itself isn’t revisited again for that trade.
How the ongoing requirement works
Maintenance margin picks up where initial margin leaves off. It’s a running check on the account’s equity relative to the current value of the securities held, applied continuously rather than just at purchase. Because it’s based on current value, it moves with the market: as a position’s value declines, the equity supporting it shrinks too, even though nothing about the loan itself has changed. When equity as a share of the position’s value falls below the maintenance threshold, a margin call is triggered.
Why a call can happen with no new activity
This is the detail that catches people off guard. Because maintenance margin is recalculated continuously against current prices, a position can move from comfortably within limits to below the maintenance threshold purely because the market moved — no additional buying, no new borrowing, nothing the account holder actively did. A few things follow from that:
- Price declines do the work. A drop in the value of margined securities directly reduces equity as a percentage of position value.
- Concentration raises the stakes. A portfolio heavily weighted in one or a few volatile holdings can swing past the maintenance threshold faster than a diversified one.
- The loan balance stays fixed. Only the collateral value changes day to day; what’s owed doesn’t shrink on its own.
Why it matters in practice
Because initial margin only applies once, at entry, it’s easy to treat it as the whole picture and stop thinking about margin requirements after a position settles. Maintenance margin is the ongoing part of the arrangement, and it’s the one that determines whether a currently open position stays in good standing as prices move around it — especially since a broker’s own house requirement can sit above the regulatory minimum and shift what maintenance threshold actually applies.
Putting the two together
Initial margin decides whether a position can be opened at all; maintenance margin decides whether it can stay open once markets start moving. Treating them as two distinct checkpoints, rather than one general idea of “margin requirements,” makes it easier to understand why a call can arrive well after the trade itself is done.