How Is the Initial Margin Amount Typically Calculated by a Clearing House?

Initial margin is calculated by the clearing house using a risk-based methodology, such as the Standard Portfolio Analysis of Risk (SPAN) system or a similar proprietary model. This calculation considers factors like the volatility of the underlying asset, the size of the position, and the time to expiration.

The resulting margin aims to cover a potential loss over a one-day period with a high degree of confidence.