The minimum equity you must maintain in a margin account after opening a position. If your account equity drops below this level, a margin call is triggered.
⚡ KEY TAKEAWAY: Maintenance margin is typically 25% of position value for stocks, but option margin follows different rules (Reg-T formula or portfolio margin). Know your broker's specific requirements.
Why It Matters
Maintenance margin is the ongoing minimum equity requirement. It's lower than initial margin but rising volatility can increase it mid-trade — triggering a margin call even if the underlying hasn't moved much.
How It Works
After opening a position, you must maintain equity above the maintenance level. For stocks: typically 25%. For options: varies by strategy and broker. Defined-risk spreads: max loss amount. Undefined risk: Reg-T formula or PM model.
Example
Short 10 SPY naked puts. Initial margin: $100K. Maintenance: $80K. Your equity is $85K — fine. VIX spikes from 18 to 28 overnight. Maintenance jumps to $95K. Now you're $10K below maintenance. Margin call.
Common Mistakes
Not understanding that maintenance margin is dynamic. It increases with volatility, even overnight. Your position can go from comfortable to margin call without the stock moving, just from a VIX spike.
The minimum equity you must maintain in a margin account after opening a position. If your account equity drops below this level, a margin call is triggered.
Why does Maintenance Margin matter for premium sellers?
Maintenance margin is typically 25% of position value for stocks, but option margin follows different rules (Reg-T formula or portfolio margin). Know your broker's specific requirements.
How does Maintenance Margin work?
After opening a position, you must maintain equity above the maintenance level. For stocks: typically 25%. For options: varies by strategy and broker. Defined-risk spreads: max loss amount. Undefined risk: Reg-T formula or PM model.
What are common mistakes with Maintenance Margin?
Not understanding that maintenance margin is dynamic. It increases with volatility, even overnight. Your position can go from comfortable to margin call without the stock moving, just from a VIX spike.
