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When you think about it it is normal. It's like making a loan to your bank to buy a house. The higher the price of the house, the higher the cash down will it require.
Okay, so far I have approached margin from the point of view of a speculator, thinking about the futures product in terms of tick increment worth, liquidity and volatility.
Whereas I think you are saying that I should think about the intrinsic value of the asset, right?
Nope, not intrinsic value (whoever knows that ), only nominal value, i.e. point x index.
Staying with @trendisyourfriend 's example: Nominal value is the price of your house, of which you are making
a fractional down payment (your margin) in order to cover the risks (liquidity, volatility, rate changes, etc.).
We have a Initial Margin - this is what you need for the FIRST contract...
then we have Intraday Margin - that means the margin for 2nd to x contracts
And beware of OVERNIGHT Margin - that means what you need to pay 15min. before future closing time
when holding overnight until normal futures market reopens again on following day.
If you are not having enough capital on your account - then all your hang over margin contracts are sold
immediately to the price near closing automatically.
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I built a cash flow/futures margin at risk model once for a NYMEX Energy Futures book, probably ten years ago now. Initially I just started with a VaR model but the big errors in the model predictions were all days when the margin level changed. As such I had to also build a model that predicted margin changes. I don't remember the exact details any longer, but the best predictor I could find of a margin requirements was the X day ATR. So at least back then, margin requirements were most heavily influenced by volatility.
Yeah, I agree with this. My understanding is that margin depends on notional value and volatility.
Higher price does not necessarily mean higher margin requirement. A large, sudden drop is price would likely cause a broker to increase margin for that product. But price very slowly going higher could translate to lower margin requirements for a product (see the ES recently for an example of this).
Actually, now that I'm thinking of it, Andreas Clenow mentions in Following the Trend that some traders use their broker's current margin requirements for their volatility calculations instead of using ATR.
I think the key thing to keep in mind is that the margin requirements are not necessarily set in stone or increased automatically. The broker or exchange can decide to increase or decrease the margin required on an instrument whenever they want.
This is what leads to things like that big run in Silver we had a few years ago. As the price went higher, the margins didn't increase. One contract was increasingly worth more and more increasing the leverage you had, and making it more attractive to trade. However, the exchange decided to increase the margins, and that meant some traders had to liquidate their position resulting in an ugly selloff.
), only nominal value, i.e. point x index. 
