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Performance bond

The exchange's own name for futures margin: a deposit guaranteeing you can meet your obligations, not borrowed money.

Stock margin is a loan and you pay interest on it. Futures margin is a bond you post and, in many accounts, still earn interest on. Nothing is lent, because you have not bought anything yet — you have entered a contract.

Understanding this changes how you read leverage. The 5% deposit does not mean you borrowed 95%; it means you control the full notional-value while having posted only collateral against the daily variation-margin you might owe.

Example: one cl contract at $80 is $80,000 of exposure held with roughly $6,000 posted. You owe nothing and pay no interest, but a $6 move against you consumes the entire bond.

Related: initial-margin, variation-margin, leverage, notional-value, clearing-house

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Margin and leverageA small deposit controlling a much larger position, and the point at which losses trigger a margin call.Position you controlnotional value $100,000your margin deposit: $5,000$100,000 / $5,000 = 20:1 leverageYour deposit absorbs every dollar of loss$5,000$2,500$0Equity leftMARGIN CALLequity has fallen to $2,5000%1%2%2.5%3%4%5%How far the price moves against you
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.

Educational only, not advice. Spotted an error? Post in Site Feedback.