# Initial Margin vs Variation Margin

*Derivatives & Options — Finicade finance glossary*

Initial margin is collateral posted upfront to cover potential future losses; variation margin is cash moved daily to settle losses that have already happened. The distinction decides who is exposed to whom: variation margin keeps exposure near zero day to day, while initial margin sizes the buffer for the gap between a default and a liquidation. Sharply rising variation margin calls are what turn a price shock into a liquidity crisis.

**Also known as:** initial margin, variation margin, margin requirements

**Related terms:** [Margin](https://finicade.com/glossary/margin), [Margin Call](https://finicade.com/glossary/margin-call), [Clearing House](https://finicade.com/glossary/clearing-house), [Daily Settlement](https://finicade.com/glossary/daily-settlement), [Counterparty Risk](https://finicade.com/glossary/counterparty-risk)

**Taught in:** Quant Quest — Transactions & Counterparty Risk

Source: https://finicade.com/glossary/initial-margin-vs-variation-margin