Variation Margin is the additional margin required by a futures exchange or a clearinghouse from a clearing member to maintain an adequate level of margin after an adverse price movement of a futures or options position. It is the amount of money a clearing member is required to pay to the clearinghouse when the market moves against their position, and it is used to cover the potential loss of the clearinghouse if the position is liquidated. The purpose of variation margin is to ensure that each party to a trade has sufficient funds to cover their potential obligations and to protect the clearinghouse and other market participants from counterparty risk.