Maintenance margin
How much collateral must a leveraged position keep on the table before the exchange forces it shut?
In plain words
Maintenance margin is the minimum collateral a leveraged position must retain to stay open. It is smaller than the initial margin needed to open the position. If a losing trade's remaining collateral falls to that floor, the exchange closes it automatically, a process called liquidation, to prevent losses beyond the posted collateral.
Why it matters
The maintenance margin defines how much adverse price movement a position can absorb before it is closed out. It is usually a percentage of the position's value, so it grows as the position's size grows, and the collateral that must cover it moves with every price change. Markets that swing widely can push collateral to the floor within hours, leaving the trader no time to add funds.
In a real week: ETH, week of 13 May 2019
ETH's week of 13 May 2019 opened at 188.07, fell to 185.32 early Monday, then reached 279.76 on Thursday and closed at 259.51, a 37.99% rise within a 50.96% range. The largest 1-hour move was 6.13%, recorded Thursday at 15:00 UTC, and realised volatility ran at 165.4% a year. A week of swings this wide illustrates the kind of price movement that determines how quickly a position's collateral approaches its maintenance margin.
A common mistake
Confusing maintenance margin with initial margin. Initial margin is what you post to open a leveraged position; maintenance margin is the lower floor below which the exchange liquidates it.