Understanding Option Margin Modes
1. Single-Currency Margin: Cross Margin
In single-currency cross margin mode, users can only open short option positions. Long positions require isolated margin (see Section 3).
Position Metrics:
| Term | Definition |
|---|---|
| Total | Long: positive; Short: negative. |
| Options Value | = Total positions × Mark price × Contract multiplier × Contract value. |
| P&L | (Mark price - Avg. open price) × Total positions × Contract multiplier × Contract value. |
| P&L Ratio | Long: (Mark price – Avg. open price)/Avg. open price; Short: Inverse. |
| Initial Margin | Long: 0; Short: See margin calculation guide. |
| Maintenance Margin | Long: 0; Short: As per initial margin. |
👉 Learn more about margin trading
2. Multi-Currency Margin: Cross Margin
Similar to single-currency mode but supports multiple currencies. Only short positions allowed; long positions require isolated margin.
Position metrics mirror single-currency mode (see table above).
3. Isolated Margin (Single/Multi-Currency/Portfolio)
Allows both long and short positions with separate margin allocation.
Additional Metrics:
| Term | Definition |
|---|---|
| Margin (Balance) | Initial margin + Manual adjustments. |
| Margin Ratio | = Margin balance / (Maintenance margin + Liquidation fee). |
Key Concepts Explained
- P&L Calculation: Reflects unrealized gains/losses based on mark price vs. entry price.
- Margin Requirements: Long positions require no initial margin; short positions have dynamic margins.
👉 Master options trading strategies
FAQ
Q1: Can I open long positions in cross margin mode?
A: No—only isolated margin supports long positions.
Q2: How is P&L ratio calculated for short options?
A: (Avg. open price - Mark price) / Avg. open price.
Q3: What’s the difference between initial and maintenance margin?
A: Initial margin secures the position; maintenance margin prevents liquidation.
Q4: Why is margin ratio important?
A: It indicates liquidation risk. Lower ratios trigger margin calls.
Q5: How does multi-currency margin work?
A: Margins are calculated in the currency of the option, pooled across positions.
Pro Tips
- Use isolated margin for directional bets to limit risk.
- Monitor mark price closely—it directly impacts P&L.
- Short options require active margin management due to higher obligations.
### SEO Keywords:
1. Option profit and loss
2. Cross margin vs. isolated margin
3. P&L calculation
4. Short option margin
5. Multi-currency margin
6. Maintenance margin ratio
7. Options trading strategies