Initial Margin in futures can be termed as the base amount of money that the broker collects from an individual in Cash who wants to trade a Futures. Initial margin is also the minimum percentage of the overall value of the contract that is collected from the individual in Cash and not any other form such as collateral.
Initial Margin-
The Initial Margin in a Future contract is the total amount of Margin or money that the broker is required to collect from the individual in the form of Cash.
Initial Margin can be also known as the bare minimum amount of money that is required to be maintained in the Trading account’s Cash Segment to buy a Future contract. The Initial margin varies from Security to Security.
A futures contract is a Form of Derivative hence it can be bought from any other form of Cash such as from Margin, or from the Collateral provided by the Broker but the Initial margin is the minimum percentage of money that is required to be paid in cash and not in any other form.
The initial margin on Index Futures is low as there is no Delivery involved on the expiry date. The Initial margin of Indices varies from 15-20%. Whereas the margin on Stock Futures is higher as there is a risk involved of Delivery.