How Does the Margin Requirement for a Short Option Position Differ in a Cash-Settled Environment?

In a cash-settled environment, the margin requirement for a short option position is generally based on the maximum potential loss, but it does not need to account for the physical delivery of the underlying asset. The calculation focuses purely on the financial risk, which can simplify the margin model compared to a physically settled option where the clearing house must also factor in the logistics and custody of the asset.