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  3. Margin

Margin types and usage

  • Updated

Users have two choices to make when it comes to the margin calculation model used in their account:

  1. Segregated or cross collateral, and

  2. Standard margin or portfolio margin

This results in four possible margin models, which are summarised in the table below.

Name

Code

Definition

Usage

Segregated Standard Margin

S:SM

A basic setup in which each position has its own margin requirements calculated separately. The margin requirements for all the positions are summed up to give the total margin requirement per asset.

  • Keeping assets separate. This includes any possible liquidations, because a liquidation will not affect assets other than the one the liquidation is executed on.

  • Buying options. Premiums paid for options are kept separate from any other positions.

  • Smaller sizes of future and perpetual trades will have lower margin requirements compared to portfolio margin setups.

Cross Standard Margin

X:SM

Cross Collateral Standard Margin. Each position has its own margin requirements calculated separately. The margin requirements for all the positions are summed up to give the margin requirement for all assets together.

  • Combining all assets. Being able to hold one asset to trade another (haircuts and collateral fees apply).

  • Smaller sizes of future and perpetual trades will have lower margin requirements compared to portfolio margin setups.

Segregated Portfolio Margin

S:PM

A margin model that assesses the entire portfolio in a particular asset in the account. The margin requirements will be based on how the portfolio for a particular asset will perform with price and volatility changes.

  • Keeping assets separate. This includes any possible liquidations, it will not affect assets other than the one the liquidation is executed on.

  • Building a complex and hedged portfolio within a single asset.

  • Lowering margin requirements on larger sized future and perpetual trades.

Cross Portfolio Margin

X:PM

Cross Collateral Portfolio Margin. A margin model that assesses the entire portfolio for all available assets in the account. The margin requirements will be based on how the portfolio will perform with price and volatility changes.

  • Combining all assets in one portfolio. Being able to hold one asset to trade another (haircuts and collateral fees apply).

  • Building a complex and hedged portfolio with multiple assets at once.

  • Lowering margin requirements on larger sized future and perpetual trades.

Standard Margin vs Portfolio Margin

Segregated Standard Margin (S:SM) is the default margin system on Deribit. With standard margin (SM), the initial margin (IM) and maintenance margin (MM) requirements are calculated separately for each position in the account.

The margin requirements for all positions are then summed together to give the total margin requirements for the account. This total margin requirement is what is compared to the margin balance to determine margin usage percentages. This approach is straightforward and easy to calculate, but because it only looks each position separately, it doesn't offer any benefits for positions that either partially or fully hedge each other.

Portfolio Margin (PM) is a margin system which takes the entire portfolio into consideration, including both futures and options together. The system estimates the profit or loss of the portfolio based on several different scenarios, including price and volatility changes, and uses the worst case scenario for the portfolio overall to calculate the margin requirements.

By looking at the whole portfolio, positions that hedge each other will automatically benefit from at least a partial offsetting of margin requirements. Therefore, the more hedged the portfolio is, the lower the margin requirements are likely to be, both as a whole and relative to SM.

Segregated vs Cross Collateral

As well as the choice between standard margin (SM) and portfolio margin (PM), the available margin modes offer the choice between segregated or cross collateral.

With segregated models, each asset will be handled independently. Only the relevant settlement currency can be used to satisfy the margin requirements for each instrument. So, BTC holdings will be used to support positions in BTC settled instruments only, ETH will be used to support positions in ETH settled instruments only, and so on. Spot markets can be used to exchange one currency for another to help ensure that the correct currencies are being held.

Alternatively, with cross collateral models, all cross collateral currencies will be assessed on their current USD value, and the resulting total USD value of the account will be taken into account for margin purposes. This allows currencies other than the settlement currency to be used to satisfy the margin requirements of a particular instrument. For example, BTC could be used to support positions in ETH settled instruments, and ETH could be used to support positions in BTC settled instruments. See the cross collateral documentation for details on which currencies are considered cross collateral currencies.

How to switch between margin types

The margin type can be chosen on Change Margin Model page.

An overview of all the margin types with the current balances is shown. The balances displayed on this page are not updated automatically, however they can be updated by pressing the refresh button.

The current active model will be shown with the label “Active”.

  1. To change the model, select the desired model in the selection menu.

  2. Accept the terms of service (do make sure you fully understand the models, the impact, and the possible liquidations).

  3. Click “change margin model”.

The chosen model applies to the main or subaccount within which it is selected. Each main or subaccount can set its own margin model separately.