How Does a Higher Volatility Asset Affect the Required Maintenance Margin Percentage?
A higher volatility asset will generally have a higher required maintenance margin percentage. The exchange sets this higher percentage to create a larger safety buffer against rapid, unexpected price swings.
A volatile asset is more likely to experience a flash crash or spike, increasing the risk of the liquidation price falling below the bankruptcy price. The higher margin mitigates this risk to the insurance fund.
Glossar
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Required Maintenance Margin
Margin ⎊ The Required Maintenance Margin (RMM) represents the minimum equity a holder of a leveraged position, such as an options contract or cryptocurrency perpetual future, must maintain within their account to satisfy regulatory and exchange-imposed requirements.
Higher Volatility Asset
Asset ⎊ The designation "Higher Volatility Asset" within cryptocurrency, options, and derivatives contexts signifies an underlying instrument exhibiting a statistically significant degree of price fluctuation relative to established benchmarks or peer assets.
Higher Margin
Leverage ⎊ Higher margin profiles in cryptocurrency derivatives necessitate a nuanced understanding of leverage mechanics, particularly concerning initial and maintenance margin requirements across exchanges.