Variation margin
Variation margin is the cash that moves each day between the clearing house, clearing firms and customer accounts to pay the mark-to-market gains and losses of open futures positions. Unlike initial margin, which stays posted as collateral, variation margin is a settlement of the day's price change.
Senzoukria · Glossary · Updated September 2026
Definition
After each settlement, positions that lost value pay and positions that gained value receive. The payments flow from customer accounts to their futures commission merchant, from clearing members to the clearing house, and back out to the winning side. Across the whole market, longs' and shorts' daily changes offset, so the clearing house pays out what it collects.
Worked example
One long ES contract is carried from a settlement of 5,000.00. The next settlement is 4,988.00, a move of -12.00 points, so 12.00 × $50 = $600 of variation margin is debited from the long and, somewhere in the market, $600 is credited to the short side. The following day settles at 4,995.00: +7.00 × $50 = $350 flows back to the long.
Initial margin versus variation margin
| Initial margin | Variation margin | |
|---|---|---|
| Nature | Collateral held against future losses | Payment of realised daily price change |
| When | Posted when the position is opened | Every settlement while the position is open |
| Returned | When the position is closed | Not returned: it is the gain or loss |
| Who sets the amount | Clearing house minimum, broker may add | The settlement price change |
Why it matters
Variation margin is how futures losses become cash losses before a trade is closed. A series of adverse settlements drains account equity, and once equity falls below the maintenance level the broker asks for more funds or reduces the position.
In Senzoukria
The application displays the positions and P&L that the broker's feed reports and does not compute margin or variation margin flows. Daily cash movements are read from the broker's statement.
Common mistakes
- Counting variation margin as a deposit that will come back.
- Using intraday chart prices instead of settlement prices to reconcile daily flows.
Related
In the same section
- Settlement price
- Vega
- Variance swap
- Vega exposure
- Vanna and charm flows
- Velocity logic
- Vanna
- Vertical spread
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Frequently asked questions
- Is variation margin a fee?
- No. It is the transfer of the day's gain or loss between the two sides of the market. The account that pays it has lost that amount; the one that receives it has gained it.
- Can variation margin be paid during the day?
- Clearing houses can make intraday margin calls in volatile conditions, and brokers can apply their own intraday rules. The ordinary cycle is daily, based on the settlement price.