Margin calls represent increased performance bond obligations to hold an exchange-traded contract such as a futures position until that contract is closed out or offset. For a hedger, a position in the market will be in the direction of their risk. If the position is moving against them such that a margin call is generated, it means that the market is moving in the direction of their opportunity – improving their overall profit margin. As an example, if I raise hogs and sell hog futures to protect against lower prices, if the market moves higher after I initiate my short futures position it will generate a margin call that will require increased capital to maintain that selling obligation. The physical hogs on my farm are appreciating in value though, and I will receive this added value when I eventually sell them in the cash market. The most important thing to realize is that while the hedge is losing, it means that position in the cash market is improving.
