When Would a Trader Choose to Use Cross Margin?
A trader would choose to use cross margin when they have a high conviction in their trades and want to reduce the probability of being liquidated on any single position. It is often used by experienced traders who are running a multi-position strategy where one position's profit can be used to cover another's temporary loss, leveraging the entire account equity.
Glossar
Shared Margin
Efficiency ⎊ Shared margin systems enhance capital efficiency by allowing traders to use the same collateral to back multiple positions simultaneously.
Cascading Liquidation
Contagion ⎊ A rapid series of forced position closures occurs when falling prices trigger a chain reaction of margin calls across a market.
High Conviction
Confidence ⎊ High conviction in trading refers to a strong belief in the expected outcome of a specific market position, often based on thorough analysis or proprietary signals.
Experienced Traders
Expertise ⎊ Experienced traders possess a deep understanding of market microstructure, technical analysis, and risk management principles.
Cross Margin
Structure ⎊ Cross Margin is an account configuration where the entire portfolio equity, comprising collateral across all open positions ⎊ futures, options, and spot holdings ⎊ is pooled to serve as a unified margin base to support all positions simultaneously.
Margin Call
Trigger ⎊ A margin call in cryptocurrency, options, and derivatives markets represents a broker’s demand for additional funds to bring an account back to the minimum required margin.