Are the Margin Requirements Different for Hedgers and Speculators?
Yes, margin requirements are often different for bona fide hedgers compared to speculators. Exchanges typically set lower margin requirements for hedgers because their positions are considered lower risk.
A hedge is designed to offset risk from an existing position in the underlying asset, meaning the overall risk profile of the hedger is lower. Speculators, who are taking on new risk, are usually required to post a higher margin to cover potential losses from adverse price movements.
Glossar
Margin Requirements
Definition ⎊ Margin requirements refer to the minimum amount of capital an investor must deposit and maintain with a broker or exchange to open and sustain a leveraged position in derivatives trading.
Lower Margin Requirements
Advantage ⎊ Lower margin requirements refer to the reduced collateral amounts that traders must deposit to open and maintain leveraged positions in derivatives markets.
Hedgers
Mitigation ⎊ In cryptocurrency derivatives, a hedger represents an entity seeking to offset potential losses arising from adverse price movements in underlying digital assets.