Margin Calculation

There are 2 types of margin calculated. Initial margin and Maintenance margin. Margin is calculated as the amount of Equity that will be reserved to open or maintain a position. 

Long call/put  
Initial margin Mark Price (*) of the option
Maintenance Margin same as Initial Margin

 

Short call  
Initial margin

Maximum ((20%  * Underlying Price – Out of the Money Amount), 
(10% * Underlying Price)) 

Maintenance margin 10% * Underlying Price

 

Short put  
Initial margin

Maximum ((20%  * Underlying Price – Out of the Money Amount), 
(10% * Underlying Price)) 

Maintenance margin 10% * Underlying Price

 

(*) Mark price of an option is the current price of the option as calculated by our risk management system. Usually this is the average between bid and ask, but for risk management purposes there are hard limits to this price. For example currently if the average between bid and ask of a certain option has an implied volatility higher than 80%, the mark price will be 80% implied volatility, and if the average of bid ask has an implied volatility lower than 50%, the mark price will be 50% implied volatility. Further if there is no market at all in an option (empty order book), the option will be valued at an implied volatility of 65%.

The values 50%, 65% and 80% can be changed by risk management without prior notice, depending on market circumstances.

This post is also available in: Chinese (Simplified)

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