What is Portfolio Margin?
Unlike regular margin, which calculates margin on the contract level, BIT portfolio margin (“PM”）evaluates the risk on the portfolio level by computing the most likely loss could occur to a portfolio under a series of hypothetical market scenarios. After the PM account is enabled, the client will be able to find the risk parameters published on the ‘Portfolio Margin’ page of BIT and monitor the client's overall margin level.
Compare to the regular margin model, PM model tends to reward hedgers by offering a greater capital efficiency to their well-maintained low-risk portfolios. For speculators who have directional portfolios, however, a lower margin is not always guaranteed with the PM enabled. Please be noted that one’s account will not always be better off with PM enabled. Examples: a long option account might be more likely to trigger liquidation under the certain market conditions with PM enabled compare to the regular margin mode.
To be qualified for a PM account, below are the minimum criterias to be met:
- Cash Balance > 10,000 USD
- The PM account holders must be able to demonstrate their experience in trading options and declare their understanding about Portfolio margin.
Portfolio Margin FAQs
Q1: What is Portfolio Margin mode (PM)?
Ans: Portfolio Margin calculates the entire portfolio’s margin requirements based on scenario analysis under different market conditions to improve capital utilization for users who maintain a balanced portfolio of hedged positions.
Q2: How to apply for PM mode? What is the minimum requirement?
Ans: Minimum cash balance of 10,000 USD equivalent is required. Please apply via email@example.com or contact your client manager.
Q3: What currencies does PM mode support?
Ans: you may refer to here for the complete lists and more currencies will be supported under PM mode. Stay tuned!
Q4: What are the trading restrictions for PM mode?
Ans: USD derivatives other than PM supported currencies cannot be traded, so if you hold a position in a non-PM derivative currency, you will not be able to switch to PM mode. refer here for the complete lists
Q5: Who is the suitable user to enable PM mode?
Ans: Those who are familiar and professional with derivatives, and whose trading strategy is long-short hedging type.
Sample of Option Trading under Portfolio Margin:
The client uses the Put Spread strategy to buy 250 ETH (strike price=2000) put options expiring on 11/24 and sell 250 ETH (strike price=1950) the put options expiring on 11/24.
At this time, due to the Put Spread form, the risk is relatively limited. The margin calculated in BIT's PM mode and well-known exchanges' PM mode is as follows:
Buy Put Spread strategy, expiry date 11/24 situation (Buy 250 ETH Put @ 2000, Sell 250 ETH Put @ 1950)
*Margin unit USD
At this time, the customer wants to sell 50 ETH of the put options he already holds (strike price = 2000). Since he sells the put options he holds, the overall portfolio risk is caused by the put options he has sold (strike price = 1950). Overall risk rises
At this time, the margin under PM will become the following situation due to the increase in risk
Sell part of the purchased put, expiration date 11/24 (buy 200 ETH Put @ 2000, sell 250 ETH Put @ 1950)
*Margin unit USD
Note: The margin under PM may be greater than the premium of the option
Q6: How to find PM mode in WEB UI mode
A: Click on the main account to change the sub-account to PM mode