Why Would a Professional Trader Choose Isolated Margin over Cross Margin?
A professional trader would choose Isolated Margin for precise risk management. It allows them to cap the maximum loss on a specific trade to the margin allocated, preventing a loss from affecting their entire account balance.
This is ideal for speculative or high-leverage trades where the trader wants to isolate the risk. Cross Margin is often preferred for hedging or low-leverage trades where the overall account balance provides a deeper margin pool.
Glossar
Isolated Margin
Segregation ⎊ Isolated Margin is an account setting where the margin allocated to a specific derivative position is strictly segregated from the collateral supporting other positions, preventing losses in one trade from impacting the maintenance margin of another.
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.