How Does Cross-Margining Mitigate the Risk of a Sudden Margin Call?
Cross-margining allows a trader to use the total collateral across all their derivative positions, even those on different assets, to meet the margin requirements for all positions collectively. If one position is losing money, the profit from another position can offset the loss, effectively reducing the overall margin required.
This diversification of collateral prevents a single losing trade from immediately triggering a margin call, providing a buffer against sudden price shocks.
