How Does Portfolio Margining Potentially Reduce Total Margin Requirements?

Portfolio margining is a risk-based approach that calculates margin based on the net risk of a trader's entire portfolio, rather than summing up the margin for each position individually. It recognizes that offsetting positions (like a long futures contract and a short call option on the same asset) reduce overall risk.

By calculating margin on the net risk, it can lead to significantly lower margin requirements, freeing up capital for traders.