How Does Cross Margin Differ from Isolated Margin in a Liquidation Scenario?
With isolated margin, only the margin specifically allocated to that single position is at risk of liquidation. If liquidated, only that margin is lost.
With cross margin, the entire available balance in the trader's account is used as collateral for all open positions. In a liquidation scenario, cross margin will draw from the entire account balance to prevent liquidation, putting the whole portfolio at risk, but making liquidation less likely.
Glossar
Cross Margin
Structure ⎊ Cross Margin is an account configuration where the entire portfolio equity, comprising collateral across all open positions ⎊ futures, options, and spot holdings ⎊ is pooled to serve as a unified margin base to support all positions simultaneously.
Isolated Margin
Segregation ⎊ Isolated Margin is an account setting where the margin allocated to a specific derivative position is strictly segregated from the collateral supporting other positions, preventing losses in one trade from impacting the maintenance margin of another.