Vega measures the sensitivity of a portfolio to changes in implied volatility. High vega exposure means a trader's profits and losses can fluctuate significantly with volatility shifts, particularly during periods of market stress.
To manage the risk of any single entity accumulating too large of a share of the total vega held on the platform, Deribit has implemented several vega limits. These limits help maintain stability, prevent excessive risk taking, and aid orderly market behaviour.
For the purposes of applying the limits, the available expiry dates are split into several time buckets.
|
Bucket # |
Start Of Bucket |
End Of Bucket |
|---|---|---|
|
1 |
The current day |
1st monthly expiry |
|
2 |
1st day after the end of bucket 1 |
2nd monthly expiry |
|
3 |
1st day after the end of bucket 2 |
1st quarterly expiry after the 3rd monthly expiry |
|
4 |
1st day after the end of bucket 3 |
Up to and including the last listed expiry |
There is a minimum threshold of vega that must be surpassed for any vega limits to apply. If a trader's vega is below the following thresholds, then there are no vega limits applied to that trader.
|
Time Bucket |
Minimum Vega in USD (BTC options) |
Minimum Vega in USD (ETH options) |
|---|---|---|
|
Bucket 1 |
40,000 |
20,000 |
|
Bucket 2 |
55,000 |
30,000 |
|
Bucket 3 |
90,000 |
45,000 |
|
Bucket 4 |
120,000 |
60,000 |
|
Total (across all buckets) |
200,000 |
100,000 |
The vega limits in the following table apply to the total vega held in any single subaccount, as well as across an entire account, including all the subaccounts summed together.
|
Time Bucket |
Vega Limit (%) |
Vega Limit (%) when Total < 10% |
|---|---|---|
|
Bucket 1 |
20 |
30 |
|
Bucket 2 |
20 |
30 |
|
Bucket 3 |
20 |
30 |
|
Bucket 4 |
20 |
30 |
|
Total (across all buckets) |
15 |
The percentage limits in this table refer to the share of platform total vega that any single account may hold. Platform total vega is computed from all open interest (OI) in the relevant bucket. For example, if bucket 1 total vega is USD 500,000 and you hold USD 75,000 vega in bucket 1, you hold 15% of the total vega for bucket 1, which is within the 20% limit.
The vega limit applies to both net short and net long vega positions. Your account is measured on a net vega basis (offsetting positions net out), while platform total vega comes from both sides of OI, so holding structures like reversals in your account can add to platform total vega without increasing your net vega share.
As the third column shows, the limit for each time bucket is increased by 50%, as long as the total across all buckets is under 10% of the total platform vega. For example, if an account is only 9% of total platform vega across all buckets, the limit for Bucket 1 is 20% * 1.5 = 30%. This means the account is permitted to be 30% of the outstanding vega in Bucket 1.
Tip
It is possible to check the vega exposure percentages for an account in the Position Builder.
When an account breaches one or more of the vega limits, an email will be sent to the registered email for the account warning of the breach, and requesting that the trader reduce their exposure where necessary.
If the exposure is not reduced as requested after 48 hours, Deribit will increase the initial margin (IM) requirements for the account by 20%. This will have the effect of requiring more margin to open any new positions.
If the exposure is still not reduced as requested after 7 days, Deribit will increase the maintenance margin (MM) requirements for the account by 5% per day until the portfolio is brought back to within acceptable limits.
Once the portfolio is compliant with the vega limits, both IM and MM levels will be reset to their standard values.