11th April 2025 – The cost of trading U.S equity futures just got a lot steeper thanks to the Trump driven tariff turmoil.
According to data from derivatives analytics firm OpenGamma, initial margin for S&P E-mini futures on CME, the cash or collateral traders must post to cover potential losses, has surged an eye-watering 27% since the start of this month – skyrocketing from $17,234 to $21,973 by April 10.
This represents a staggering 15% hike leading into the implementation of the tariffs on April 9, followed by a single-day spike of over 10% after the abrupt 90-day postponement sparked an equities market rebound.
While initial margin parameters published by major clearing houses haven’t budged, a combination of surging variation margin – the money exchanged daily between traders to reflect gains or losses on open positions – and volatility-sensitive initial margin calculations have been ratcheting up risk requirements at lightning speed.
“It’s the more subtle impact of Value at Risk (VaR) based initial margin models that’s caught many off guard,” according to Jo Burnham, margin expert at OpenGamma. “Unlike SPAN-style approaches, which depend on predefined ranges and haven’t adjusted much despite choppy markets, VaR models dynamically adjust to market conditions.”
S&P derivatives at CME are now governed by a Filtered Historical VaR framework. This means not only do sharp price movements feed directly into margin models, but rising volatility amplifies them further. This results in a feedback loop whereby each spike in uncertainty drives a new round of liquidity demands.
“For derivatives traders, losses are realised daily through variation margin,” Burnham continued. “Anyone long equities or short volatility over the past week has been hit hard. But when the market flipped on the news of a tariff delay, it was the bears’ turn to suffer — margin calls were issued en masse as positions moved sharply against short sellers.
“All of this reinforces an important point for investors: margin isn’t just about rates published by clearing houses. It’s about the unpredictable connection between price moves, volatility, and model sensitivity. For funds running tight cash buffers or complex, leveraged trades, especially those involving options or basis strategies, this month’s Trump tariff driven volatility has been a harsh lesson in margin risk.”