Portfolio Margin mode allows users to trade spot, margin, perpetual swaps, futures, and options within one account and uses a risk-based model that determines margin requirements.
This model takes into consideration positions in spot, margin, perpetual swaps, futures and options combined, thus potentially reducing the margin requirements of a portfolio. Portfolio Margin allows for effective margin coverage while preserving efficient use of capital.
How can I be qualified for Portfolio Margin?
To be qualified for portfolio margin, you:
- Must maintain minimum net equity of 100,000 USD.
- Must have experience in trading options and declare to have an understanding of the concept of portfolio margin.
How does risk-offsetting work in Portfolio Margin?
In OKX portfolio margin, all derivatives are grouped into risk units based on their underlyings (e.g. BTC-USD, BTC-USDT, ETH-USD, ETH-USDT, etc). The perpetual swaps, futures, and options with the same underlying are considered holistically within the risk unit. Margins are calculated per risk-unit, so as to factor in risk-offsetting among instruments.
Note: under OKX risk-unit groupings, crypto-margined and USDT-margined contracts are considered as different risk-units.
e.g. BTC-USD risk unit contains all BTC-margined BTC-USD perpetual swaps, futures, and options; while BTC-USDT risk unit contains all USDT-margined BTC-USDT perpetual swaps and futures.
How does Portfolio Margin calculate?
Maintenance Margin Requirement (MMR) is determined in risk unit basis, where all instruments (perpetual swaps, futures, and options) are grouped by underlyings to simulate the maximum loss that can occur in a portfolio under a specific set of market conditions. Then the USD-value of the individual MMRs will then be summed up into a portfolio MMR (in USD value)
Initial Margin Requirement (IMR) is then derived from MMR.
Portfolio Margin Components
Portfolio margin consists of derivative margin and borrowing margin. Portfolio margin calculates sum up derivatives margin under each risk unit and then add borrowing margin to obtain the margin at portfolio level.
Negative-delta derivative MMR = MR required for all derivative positions + MR required for all open derivative order with negative delta
A. Derivatives MMR
Derivatives margin calculates 6 risks (MR1-6) by stress testing the portfolio under a specific set of market conditions of each risk unit, and then applying the minimum charge (MR7). Minimum charge is designed to cover any liquidation fee, transaction cost, and slippage. Details of corresponding market conditions are available in Appendix.
- MR1: Spot shock (applicable for all derivatives)
- MR2: Theta decay risk (applicable for options only)
- MR3: Vega risk (applicable for options only)
- MR4: Basis risk (applicable for all derivatives)
- MR5: Interest rate risk (applicable for options only)
- MR6: Extreme move (applicable for all derivatives)
- MR7: Adjusted minimum Charge (applicable for all derivatives)
B. MR8: Borrowing MMR/IMR
Borrowing margin calculation calculates margin based on the borrowing amount on each underlying per corresponding tiers. Please refer to margin ratio defined here.
Both auto-borrow mode and non-borrow mode are available. In auto-borrow mode, the user could sell a currency unavailable in account through spot or derivatives when the total USD-equivalent equity at portfolio level is sufficient. Borrowings could include margin borrowing, options buyer borrowing, and negative UPL (unrealized profit and loss) caused by opening derivatives positions as well as borrowing used for opening derivatives positions.
Please note MR8 also include the borrowings that might be required to cover derivatives MMR.
C. Margin Ratio Calculation
- The USD value of margin required:
- The USD value of the portfolio equity
- The margin ratio of the portfolio is then determined by USD value of the portfolio equity divided by USD value of margin required.
How can I test portfolio margin on existing/simulated portfolio?
Position Builder and corresponding API is available for the user to test the portfolio margin for your existing position (even if you are using other margin modes), as well as any simulated portfolio.
- The user can simulate new positions in position builder. IMR and MMR are shown as below. The user can also include their existing positions with the simulated positions, such that he/she can also simulate the impact on IMR and MMR.
- When the mouse is hovering around MMR, the system will show the breakdown of MMR based on the above MR scenarios.
What will happen during liquidation?
When the margin ratio is lower than a certain threshold (eg. 300%), the system will send a liquidation alert to the account owner.
The liquidation in portfolio margin mode is triggered based on whether the margin ratio reaches 100%. Due to potentially low liquidity of options, liquidation could result in new perpetual swaps or futures positions being opened, however, only to decrease the risk profile of the whole portfolio.
The liquidation process will execute sequential steps. The flow will go to the next step if the account is still at risk after the previous one is completed and can never be undone. The flow is completed when the account backs to a safe status ( margin ratio >120%) or all the positions in the account are liquidated.
Step 1. Dynamic hedging process (DDH)
DDH refers to the use of the DDH principle to reduce the overall risk of the portfolio margin account by adjusting the positions of perpetual swaps/future contracts. DDH is applicable on option positions when spot shock risk (MR1) is largest among all risks (eg. BTCUSD index down 15%)
Step 2. Basis hedge process
Basis hedge process is to reduce the basis risk(basis risk means the risk of different contract prices for the same underlying with different expiry dates).
Step 3. General position reducing process
General position reducing process prioritizes the positions that can make the account positions safer to reduce the account maintenance margin. The number of positions to be reduced is determined by both default system configurations (the liquidity of each instrument) and the tradable positions.
Appendix: Margin Calculations
Please note all the parameters listed below are subject to change based on market environment.
MR1: Spot shock
Spot shock scenario is comprised market simulations moving the underlying up or down or unchanged in combination with moving implied volatility up or down or unchanged. MR1 is the maximum loss in these 21 market simulations (7 price movement simulations * 3 implied volatility change simulations; Implied volatility change could be in volatility points or percentage; MR1 takes the maximum loss)
Price Move
|
Underlying Currency
|
Maximum Price Move
|
|
BTC, ETH
|
+/- 0%, 5%, 10%, 15%
|
|
LTC, BCH, EOS, OKB, DOT, BSV, LINK, FIL, ADA, TRX, UNI, XRP
|
+/- 0%, 7%, 14%, 20%
|
|
Others
|
+/- 0, 8%, 16%, 25%
|
Implied Volatility Change (Option only) in points or in %
|
Time to Expiry
|
Maximum Implied Volatility Change in Points
|
Maximum Implied Volatility % Change
|
|
0 days
|
30 (e.g IV = 50%, after shock IV = 80% or 20%)
|
50 (e.g IV = 50%, after shock IV = 75% or 25%)
|
|
30 days
|
25
|
35
|
|
60 days
|
20
|
25
|
MR2: Time decay risk (option only)
Time decay risk measures 24 hour decay in portfolio value assuming no change in underlying price move and implied volatility.
MR3: Vega term structure risk (option only)
Vega term structure risk arises from differences in option value for the same underlying with different expiry dates under same implied volatility shock. It measures the risk of change in implied volatility across different expiry dates that is not captured in MR1.
MR4: Basis risk
Basis risk arises from differences in contract prices for the same underlying with different expiry dates. The futures with further away expiry dates are likely to be more volatile than the futures that are closer to expiry. It measures the risk of change in forward price across different expiry dates.
Basis risk scenario is comprised of different market simulation, moving the forward price or forward basis up on positive delta on each expiry.
|
Underlying Currency
|
Maximum Forward Basis move
|
Maximum Forward Price Move
|
|
BTC, ETH
|
30%*
|
1.5%*
|
|
LTC, BCH, EOS, OKB, DOT, BSV, LINK, FIL, ADA, TRX, UNI, XRP
|
35%
|
2%
|
|
Others
|
40%
|
2.5%
|
- Forward price at expiry 1 is 3000 USD/ETH
- Forward price at expiry 2 is 3500 USD/ETH
- Spot is 3200 USD/ETH
- Simulated maximum forward price basis move at expiry 1 is -200 *30% and maximum forward price move at expiry is 3000 * 1.5%
- Simulated maximum forward price basis move at expiry 1 is 300 *30% and maximum forward price move at expiry is 3500 * 1.5%
|
Days
|
1
|
7
|
14
|
30
|
90
|
180
|
360
|
720
|
|
PC1
|
3
|
2
|
1.75
|
1.5
|
1
|
0.9
|
0.8
|
0.7
|
|
PC2
|
4
|
3
|
2
|
1
|
0
|
-0.5
|
-0.75
|
-0.9
|
MR6: Extreme move
Extreme move scenario is similar to spot shock scenario but with a maximum underlying price move of +/- 30% and no change in implied volatility.
MR7: Minimum charge
Step 1. Raw minimum charge
Per contract charge = max(minimum charge per contract, minimum charge per delta*abs(delta )*contract multiplier) + tc + liquidation
Minimum charge per delta (min_per_delta) =0.02
For long positions: minimum charge per contract = min(0.02, Mark Price) * contract_multiplier
For short positions, minimum charge per contact = 0.02 * contract_multiplier
Raw minimum charge is sum of all the costs described above, then adjusted Minimum charge is derived from a scaling factor function based on raw minimum charge under each risk unit. Scaling factor is designed to reflect the slippage to liquidate portfolios with different sizes.
Tier configuration on BTC, ETH
Please refer to the latest adjustment on scaling factor logic
|
Tier (i)
|
Range of the raw minimum charge (in USD)
|
Multiplier
|
|
1
|
[0 ~10,000]
|
1
|
|
2
|
(10,000 ~70,000]
|
2
|
|
3
|
(70,000 ~170,000]
|
4
|
|
4
|
(170,000 ~300,000]
|
6
|
|
5
|
(300,000 ~470,000]
|
8
|
|
6
|
(470,000 ~700,000]
|
10
|
|
7
|
(700,000 ~+∞)
|
12
|
Tier configuration on LTC, BCH, EOS, OKB, DOT, BSV, LINK, FIL, ADA, TRX, UNI, XRP.
|
Tier (i)
|
Range of the raw minimum charge (in USD)
|
Multiplier
|
|
1
|
[0 ~7,000]
|
1
|
|
2
|
(7,000 ~16,000]
|
2
|
|
3
|
(16,000 ~29,000]
|
3
|
|
4
|
(29,000 ~43,000]
|
4
|
|
5
|
(43,000 ~69,000]
|
5
|
|
6
|
(69,000 ~95,000]
|
6
|
|
7
|
(95,000 ~121,000]
|
7
|
|
8
|
(121,000 ~147,000]
|
8
|
|
9
|
(147,000 ~ +∞)
|
9
|
Tier configuration on other underlying
|
Tier (i)
|
Range of the raw minimum charge (in USD)
|
Multiplier
|
|
1
|
[0 ~3,000]
|
1
|
|
2
|
(3,000 ~8,000]
|
2
|
|
3
|
(8,000 ~14,000]
|
3
|
|
4
|
(14,000 ~19,000]
|
4
|
|
5
|
(19,000 ~27,000]
|
5
|
|
6
|
(27,000 ~36,000]
|
6
|
|
7
|
(36,000 ~45,000]
|
7
|
|
8
|
(45,000~54,000]
|
8
|
|
9
|
(54,000 ~63,000]
|
9
|
|
10
|
(63,000 ~72,000]
|
10
|
|
11
|
(72,000 ~81,000]
|
11
|
|
12
|
(81,000 ~90,000]
|
12
|
|
13
|
(90,000 ~+∞)
|
13
|
MR8: Borrowing Margin
In auto-borrow mode, the user could sell a currency unavailable in account through spot or derivatives when the total USD-equivalent equity is sufficient. A potential borrowing amount will be generated in the user’s account and some of the adjusted equity will be used as margin requirement. When the currency’s equity is less than 0 due to overselling or the derivative loss is settled in the currency, the real liability and the corresponding interest of this currency will be generated automatically.
In non-borrow mode, the user could only use the available balance or available equity of the currency to place orders of spot, futures, perpetual swap,and options. There may be a situation in which the equity of a certain currency cannot pay off the loss settled in this currency. In this situation, if the account has surplus equity in other currencies and the overall USD value of the account is sufficient, the account will be safe, and the real liability will be passively generated. If the liability is within the interest-free range of the currency, no interest will be charged. When the liability of the currency exceeds the interest-free limit, a forced repayment (TWAP) will be triggered. The system will automatically use available equity of other currencies in the account to cover the liability and make it stay within the interest-free limit. TWAP will be executed by selling the positive assets into USDT and repaying the liability with USDT.
Potential borrowing = actual borrowing + virtual borrowing
Actual borrowing refers to margin borrowing, Options buyer borrowing, and negative UPL (unrealized profit and loss) caused by opening positions. Actual borrowing occupies the user's Margin tier limit, main account limit, and the platform's total lending limit.
Virtual borrowing refers to borrowing used for opening positions. The virtual borrowing occupies the user's Margin tier limit, but does not occupy the user's main account limit and the platform's total lending limit.
The negative UPL caused by the opening positions in actual borrowing enjoys the interest-free limit. While the borrowing caused by Margin borrowing, Options buyer borrowing, and the realized profit and loss of the contract does not enjoy the interest-free limit.
Please refer to interest calculation for the details of the interest-free limit rules.