The additional funds that a clearing house or broker requires a trader to deposit when the mark-to-market value of their open positions moves against them, reducing their account equity below the maintenance margin level. Variation margin is calculated and settled daily (or intraday in volatile markets) to ensure that both parties to a derivatives contract can meet their obligations. Failure to meet a variation margin call can result in forced liquidation of positions.
Example
“After crude oil futures dropped $3 overnight, the trader received a variation margin call of $15,000 and had to deposit additional funds before the market opened.”