The present subject matter is directed to a system and method for operating a wind turbine. The method includes measuring, via one or more temperature sensors, a local temperature of a component of the wind turbine for a predetermined time period. The method also includes determining a power capability of the wind turbine as a function of the local temperature. Another step includes measuring, via one or more sensors, a power output of the wind turbine for the predetermined time period. A further step includes determining a power margin of the wind turbine as a function of the power capability and the measured power output and controlling the power output of the wind turbine based, at least in part, on the power margin.