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The cash transfer that takes place after each trading day (and sometimes intraday) in most futures markets to mark long and short positions to the market. Unlike a forward contract which settles only when the contract matures, most futures contracts are settled daily by the payment of variation margin from the party who has lost money that day to the party who has made money. If each point in the price of a contract is worth $1,000, and the futures price goes up by 1/2 point during a session, the short will pay the long $500 per contract in variation margin. Holders and sellers of futures options do not exchange variation margin under current margin procedures, but the ability to capture accumulated variation margin payments through exercise affects the value of an American-style futures option. See also Maintenance Margin, Margin.
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