What Is “Cross-Margin” versus “Isolated Margin” in Derivatives Trading?
Isolated margin dedicates a specific, fixed amount of collateral to a single position; if the margin is depleted, only that position is liquidated. Cross-margin uses the entire available balance in the trading account as collateral for all open positions.
This spreads the risk, allowing winning positions to cover losing ones, but it also means that a single losing position can potentially wipe out the entire account balance, including collateral meant for other positions.
