What Is “Cross-Margining” and How Is It Used in a Derivatives Portfolio?

Cross-margining is a system that allows a single margin account to be used to cover positions in different but related derivatives, such as futures and options on the same underlying asset. It is used to calculate margin requirements based on the net risk of the entire portfolio, rather than summing the gross margin for each position individually.

This often results in lower overall margin requirements for hedged portfolios, as offsetting risks are recognized.