Futures represent an obligation either to buy or to sell the underlying asset at a specified date in the future. A margin is an amount that is calculated by the Australian Clearing House Pty Ltd (ACH), a wholly owned subsidiary of the ASX, as necessary to ensure that you can meet that obligation.

When you trade a futures contract, you do not pay, or receive, the full value of the contract at the time of the trade. Instead, both buyers and sellers of ASX futures contracts pay an initial margin and are also liable for daily variation margin calls. In times of high volatility, ACH may also call intra-day margins.

How margins are calculated?

ACH calculates margins using a system called TIMS (Theoretical Intermarket Margining System). 

The total margin is made up of two components:

• the initial margin is paid by both the buyer and the seller of the futures contract. It covers the maximum probable one-day move in the price of the futures contract, as assessed by ACH. ACH sets the initial margin for futures contracts according to the volatility of the underlying index. 
• the variation margin is an amount that is paid by a trader to cover an unfavourable move in their futures position. Each day your futures position is revalued, or settled to market. If the position has moved against you since the previous day's close of trade, you will be required to pay the difference. If the position has moved in your favour, you will receive that amount.