How does a trader typically use margin in futures trading?

In futures trading, margin is primarily used as a financial assurance that traders will fulfill their obligations under the terms of the contracts they enter into. When traders open a position in the futures market, they are required to deposit a certain amount of money known as a margin. This margin serves as a security deposit that ensures traders have sufficient funds to cover potential losses.

By requiring this margin, exchanges can minimize the risk of default, both for the individual trader and for the broader market. If a trader's account falls below a certain threshold due to losses, they may receive a margin call, requiring them to deposit additional funds to maintain their position. This mechanism is essential for maintaining market integrity and stability, allowing participants to engage with confidence, knowing that there are safeguards in place to enforce financial responsibilities.

The other options do not accurately reflect the role of margin in futures trading. Maximizing profits involves risk and market analysis, but trading on margin is not unrestricted nor solely for profit maximization. Manipulating market prices is unethical and not a legitimate use of trading strategies. Providing discounts on trading fees is not related to the function of margin; rather, trading fees are determined by the broker or exchange and do not directly involve margins.