Futures and Options: How Leverage, Margin and the Margin Call Actually Work

A futures contract and an options contract are both about the future, but one creates an obligation and the other creates a right. That one-word difference completely changes the shape of the risk, the amount of money you must set aside, and how your account responds to every price move. This lesson opens up the mechanism of both instruments.

What you will learn in this lesson

The fundamental difference between an obligation and a right, the role of the clearing house, what initial margin and maintenance margin mean, the logic of daily settlement, the simple arithmetic of leverage, and which contracts the derivatives market of the Iran Mercantile Exchange trades today. This lesson explains mechanism only and contains no trading advice.

Definitions

• Derivative (ابزار مشتقه): a contract that is not an independent asset in itself; its value is "derived" from the price of another asset.
• Underlying asset (دارایی پایه): the asset the contract is written on, for example saffron, silver, or units of a gold fund.
• Futures contract (قرارداد آتی): a standardised agreement in which buyer and seller both commit to trade a set quantity of the underlying asset on a set date, at a price they agree on today.
• Options contract (قرارداد اختیار معامله): a contract that gives its buyer a right, not a duty, while the seller is obliged to follow the buyer's decision.
• Call (اختیار خرید) and put (اختیار فروش): the right to buy the underlying asset, and the right to sell it.
• Strike price (قیمت اعمال): the predetermined price at which the option is exercised.
• Premium (پرمیوم): the amount the option buyer pays the seller to acquire that right.
• Margin (وجه تضمین): money blocked in an account to guarantee that an obligation will be met.
• Clearing house (اتاق پایاپای): the institution that stands between the two sides and guarantees performance, so neither party has to worry about the other defaulting.
• Leverage (اهرم): the ratio of the contract's total value to the money you have actually committed.

How a futures contract works, step by step

1. Standardisation. The exchange fixes the contract size, the commodity grade, the delivery month and the delivery method in advance. The only thing the two sides negotiate is price.
2. Initial margin from both sides. Because the obligation runs both ways, buyer and seller must each block an amount in their operating account. This amount is neither fixed nor permanent: the exchange reviews and announces it periodically, based on market volatility.
3. Daily settlement. At the end of each trading day, profit and loss are calculated against that day's settlement price, and the amount is deducted from the losing account and paid into the other one that same night. Your loss does not sit on paper until maturity; it is realised in cash every day.
4. Maintenance margin. The account floor is 70 percent of the margin. As long as the balance stays above that floor, the account status is normal.
5. The margin call. The moment the balance drops below that floor, a notice is issued. From then on there are only two paths: deposit variation margin until the account returns to the required level, or close all or part of the position. If the trader does neither, the position is closed automatically.
6. Daily price limit. The price may move at most 5 percent above or below the previous day's settlement price.
7. How it ends. A large share of positions is closed before maturity and only the cash difference is settled; physical delivery at exchange-approved warehouses is the exception, not the rule.

How an options contract works

With options, the symmetry of step two breaks. The buyer pays only the premium and posts no margin, because the buyer carries no obligation and the worst possible outcome is simply not using the right. The seller, by contrast, receives the premium but accepts an obligation, and for exactly that reason must post margin; here too the account floor is 70 percent of the required margin, and falling below it triggers a margin call.

Combining the two option types with the two sides of a trade produces four positions: long call, short call, long put and short put. At any moment a contract sits in one of three states: in the money (exercising it profits the buyer), at the money (neither profit nor loss) and out of the money (exercising it would cost the buyer).

One structural point matters: options contracts on Iran's exchanges are currently designed in the European style, meaning the buyer can exercise only on the maturity date and not before. This design makes valuation and risk control simpler, but it removes the buyer's flexibility to react to price swings along the way.

A worked example

Both examples below are hypothetical and exist only to show the arithmetic.

Example one: leverage and the margin call in a futures contract. Suppose each contract covers 1,000 units of an underlying asset and each unit costs 50,000 tomans, so the contract's total value is 50 million tomans. Suppose the exchange has set initial margin at 20 percent, that is 10 million tomans. With 10 million tomans you control 50 million tomans of assets: leverage of 5 times.

• If the price rises 10 percent, the contract's value gains 5 million tomans. Against your 10 million tomans of committed capital, that is a 50 percent return, not 10 percent.
• If the price falls 10 percent, that same 5 million tomans is a loss, that is half your money. Leverage multiplies identically in both directions.
• The account floor is 70 percent of 10 million, that is 7 million tomans. So the price does not need to fall 10 percent for the notice to arrive: a 7 percent drop is enough to put a loss of 3,500,000 tomans on the account, bring the balance to 6,500,000 tomans and push it through the floor. The margin call is issued that same day.

Example two: the asymmetry in a call option. Suppose a call option with a strike price of 55,000 tomans and a premium of 2,000 tomans per unit is bought on that same 1,000-unit contract; the total premium is 2 million tomans.

• If the price reaches 60,000 tomans at maturity, exercising is worth 5,000 tomans per unit, that is 5 million tomans; after deducting the premium, 3 million tomans remain.
• The break-even point is 57,000 tomans: the strike price plus the premium.
• If the price stays below 55,000 tomans, the buyer does not exercise and the entire loss is the 2 million tomans premium, not one rial more. The buyer's maximum loss is known from day one.
• For the seller of that same option the picture is mirrored but asymmetric: the most they can gain is the 2 million tomans premium, while their obligation has no predetermined ceiling and their loss grows as the price climbs.

In Iran's market

Iran's derivatives market sits mainly at the Iran Mercantile Exchange. Futures contracts trade on underlyings such as premium (negin) saffron, silver, and units of gold investment funds, and alongside them options contracts are defined on gold coins, on saffron futures contracts themselves, and on gold fund units. Each contract's technical specifications, from size to current margin, are published on the exchange's official site and change periodically.

Two figures show the market's present scale. On Sunday 11 Mordad 1405 (2 August 2026), the financial and derivatives market of the Iran Mercantile Exchange concluded 1,770 million contracts worth 11,300 billion tomans. On Tuesday 13 Mordad 1405 (4 August 2026), the figure was 1,308 million contracts worth 8,500 billion tomans. The noticeable swing between those two readings two days apart is itself a feature of this market.

New instruments are added regularly: according to an exchange notice on 10 Mordad 1405 (1 August 2026), options contracts on units of the Karamad gold fund, trading symbol "Zargar", maturing 28 Shahrivar 1405 (19 September 2026), launch on Saturday 17 Mordad 1405 (8 August 2026). Per the same notice, these options contracts carry no daily price limit and their trading session opens with a 15-minute opening auction period.

Entering this market involves a separate administrative path. The ordinary trading code you use to buy shares is not enough: after registering and completing identity verification on Sejam, you must obtain a derivatives code from a broker that is a member of the Mercantile Exchange, nominate an operating account at one of the designated banks through which the daily margin deposits and withdrawals run, and pass the derivatives trading competency exam, a test designed to confirm the trader understands these very mechanisms. Fees also carry a different weight in leveraged trading, because they are measured against the money committed rather than the contract's full value; the lesson on trading fees and taxes works through that arithmetic separately.

Common mistakes

• "Leverage means more profit." Leverage is a multiplier, not a direction. The same number that turns a 10 percent return into 50 percent turns a 10 percent loss into 50 percent too.
• "My maximum loss is the margin I posted." That statement is true for an option buyer, but not for a futures contract. Daily settlement means your account is updated every night, and if the market keeps moving against the position the system demands more money from you.
• "The option buyer and seller are mirror images." In profit and loss terms, yes; in risk shape, no. The buyer's loss has a ceiling equal to the premium; the seller's gain has a ceiling equal to that same premium, but the seller's loss has no predetermined ceiling.
• "Because the price limit is narrow, I can exit whenever I want." The price limit constrains how fast the price moves, not your ability to exit. When the market turns one-directional and queues form, there may be no counterparty for several consecutive days, while daily settlement continues throughout those same days.
• "A futures contract means I end up taking delivery of the goods." In practice most positions are closed before maturity and settled in cash; physical delivery is an available but lightly used route.
• "I can exercise an option whenever I like." Under the European style used in Iran today, exercise is possible only on the maturity date. You can, of course, sell the option contract itself in the market before maturity; selling a contract and exercising it are two different acts.

Summing up

A futures contract is a two-sided obligation backed by margin from both parties and rewritten to the current price every night through daily settlement; its leverage comes precisely from the fact that you pay a fraction of the contract's value, and the margin call is the moment the balance crosses the 70 percent floor. An options contract moves that obligation onto one side: the buyer purchases a right and their loss is capped at the premium, while the seller sells an obligation and posts margin for exactly that reason. Understanding these two structures is a prerequisite for reading any derivatives board.

In the previous lesson we saw which channels carry the exchange rate and world prices into a company's profit. For current prices of underlying assets see the gold price page, and for the rest of the series visit Sahmino Academy.