Deribit has an alternative approach to the handling of Delta (affects all futures and options traders), the Risk Matrix (S;PM and X:PM Users) and Margin (S;PM and X:PM Users) during the daily settlement period.
On a book level, the Delta will decay linearly to 0. For example, a call with Delta 0.5 will be Delta 0.25 after 15mins into the settlement period. (Note that this is not just on the frontend, i.e. it affects the delta you get through the API)
Outside of settlement, Net Transaction Delta Position = Position Deltas - Option Position Mark Prices (same as always)
However during settlement, for the expiring expiry, the Net Transaction Delta Position = Position Deltas - Decayed Option Mark Prices.
Please be aware that through the API you will be getting a different Delta so, for example, an in-the-money call option would have a Delta close to 0 near 8:00 UTC.
Example:
You are long one time the 7000 C in the expiring expiry. This call currently has a delta of 1.0 and a Mark Price of 0.3.
After 15 mins into the settlement period, the call Delta will be 0.5. The new Net Delta for the call: new Delta - decayed mark price. So 0.5 - 0.3 * (1 - 15/30) = 0.35.
In general, Delta Total can be thought of as Net Delta * Positions.
Or it can be thought of as Delta Total = Positions Delta - Decayed Option Expiring Positions Values - rest of Option Positions Values
This change does not affect the Perpetual contract but does affect expiring quarterly futures during the settlement period. If a Futures contract is also expiring, its Delta would just linearly decay from 1 to 0 during the settlement period.
This most negative value in your risk matrix is added with your contingency to give your maintenance margin. Currently, this margin is linearly moved to your Projected Maintenance Margin during the settlement period. This will no longer be the case.
Instead, just for the expiring expiry, the underlying value we use for the risk matrix will converge to the EDP (Estimated Delivery Price) as we go further into the settlement period. So the -10% scenario after 15 mins into expiry will actually be using the underlying value if the index were to move -5%, what would the resulting value of EDP be.
Spreadsheet to understand the effects: LINK
As of 11 May 2021 Deribit has changed the underlying instrument for options during the settlement period as follows:
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If the expiring instrument does not have futures as underlying but uses a synthetic future (e.g. daily options) we will start using the Estimated Delivery Price as Underlying Price for the expiring instrument as of 7.30 UTC
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If the expiring instrument has tradable futures as underlying we will start using the Estimated Delivery Price as Underlying Price for the expiring instrument as of 7.55 UTC
The underlying instrument as shown in the UI or API will not reflect this new approach. The name of the underlying book will show the index when, as mentioned, actually the EDP will be used.
Should you have any questions then contact Shaun (<shaun@deribit.com>) or Telegram: @Shaun_Deribit