How Does Portfolio Margining Potentially Lower Overall Margin Requirements?
Portfolio margining calculates margin based on the net risk of an entire portfolio, rather than on each position individually. If a portfolio contains offsetting positions (e.g. a long future and a short option), the net risk is lower.
This reduction in net risk allows the exchange to require a smaller total margin deposit, making capital use more efficient.
Glossar
Portfolio Margining
Framework ⎊ Portfolio margining, within cryptocurrency derivatives and options trading, represents a sophisticated risk management technique that dynamically adjusts margin requirements based on the overall portfolio’s risk profile rather than individual positions.
Lower Overall Margin
Margin ⎊ A diminished overall margin, within cryptocurrency derivatives and options trading, typically reflects a compression of the difference between an asset's price and the strike price of an option, or a reduction in the profitability of a trading strategy relative to its initial projections.
Offsetting Positions
Mitigation ⎊ Offsetting positions, within cryptocurrency derivatives, represent strategies designed to neutralize directional risk exposure inherent in a portfolio or specific trade.