How Does a Margin Call on a Short Cryptocurrency Option Differ from a Traditional Equity Option?
A margin call on a short cryptocurrency option often differs due to the extreme volatility and 24/7 nature of the crypto market. Crypto options typically have higher initial margin requirements and more frequent, often automated, margin calls to account for rapid, large price swings outside of traditional market hours.
The collateral may also be crypto assets, adding complexity to valuation and liquidation, whereas equity options use traditional cash or securities collateral.
Glossar
Crypto Options
Volatility ⎊ Crypto options, within the cryptocurrency derivatives landscape, represent contracts granting the holder the right, but not the obligation, to buy or sell a specified cryptocurrency at a predetermined price on or before a specific date.
Traditional Equity
Asset ⎊ Traditional Equity represents a fractional ownership asset in a corporation, granting the holder a residual claim on the company's assets and earnings after all liabilities are settled.
Equity Options
Contract ⎊ Equity options are derivative contracts granting the holder the right, but not the obligation, to buy or sell a specific quantity of an underlying stock at a predetermined price before a set expiration date.