An exchange or broker raising the required deposit per contract, usually after volatility rises, which forces leveraged holders to add cash or reduce size.
Requirements are recalculated regularly and changed with a day or two of notice. Since they track realised volatility through the scan-range, increases arrive after a large move, not before it, and they land on everyone holding the product at once.
That synchrony is what makes hikes market-moving. Forced reduction is mechanical selling by holders who have no view, and it can extend a move well past what the original news justified. The 1980 silver collapse and the 2021 nickel crisis both featured margin increases as accelerants.
Example: a trader with $60,000 equity holds 4 crude contracts at $6,000 margin, using $24,000. An increase to $9,500 lifts the requirement to $38,000. Still fine — but a trader holding 9 contracts goes from $54,000 to $85,500 required and must sell four before the session opens.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.
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