1. What is Options Margin?
The purpose of depositing options margin is to ensure that users can perform options trading normally (buying, selling, holding and exercising options contracts upon expiry).
Options trading contains four types of margin, which are order margin, position margin, maintenance margin, and used margin.
Order Margin: Margin held for open orders. It is used to make sure that users can have enough funds to complete orders and exercise the options taking premiums into account. It is supposed that a position margin is available correspondingly after an order is filled.
Open new positions:
“Buy-to-Open” Order Margin = (order price * contract multiplier + fee) * amount of contracts
“Sell-to-Open” Order Margin = max (position margin – order price * contract multiplier + fee, minimum order margin * contract multiplier) * amount of contracts
When a short position order is filled, the seller pays transaction fee and receives premium, and the position margin is held.
“Sell-to-Close” Order Margin: (max (fee – order price, 0) * contract multiplier) * amount of contracts
“Buy-to-Close” Order Margin: (max (order price - position margin / contract multiplier + fee, 0) * contract multiplier) * amount of contracts.
The user needs to pay premium and transaction fee to release the margin for the short position.
Position Margin: Margin required for holding current positions.
Buyer’s long position margin is 0.
Call Options’ Seller:
position margin = [max (0.1, 0.15 - OTM value/same expiry futures mark price) + options mark price] * contract multiplier * amount of positions
Put Options’ Seller:
position margin = [max (0.1 * (1 + options mark price), 0.15 – OTM value/ same expiry futures mark price) + options mark price] * contract multiplier * amount of positions
OTM value: This OTM value is used to calculate account risk. Take a call option as an example. If the price of the underlying asset is lower than the strike price, it is an out-of-the-money (OTM) option, which is unfavorable for the buyer to exercise (since it is supposed that the buyer should not buy the underlying asset at a higher exercise price). The buyer then chooses not to exercise the option. The OTM value of the call option here indicates how much the mark price of the same expiry futures is below the options strike price. The greater the discrepancy between the mark price of same expiry futures and the options strike price, the higher the OTM value. The same logic applies to a put option.
Hint: “Options mark price” is counted in BTC. “Amount of positions” is the absolute value of actual amount of positions.
Maintenance Margin: Minimum margin required to maintain current positions. Partial liquidation will occur if the account balance drops below the maintenance margin.
Buyer’s maintenance margin is 0.
Call Options’ Seller: Maintenance margin = (0.075 + mark price) * contract multiplier * amount of positions
Put Options’ Seller: Maintenance margin = (0.075 * (1 + mark price) + mark price) * contract multiplier * amount of positions
Hint: “mark price” is counted in BTC. “Amount of positions” is the absolute value of actual amount of positions.
Used Margin: the sum of Order margin and margin on hold for open positions.