The Portfolio Margin Mode of the Unified Account is now available on our Gate's Web, App (options trading is currently not supported on the app), and the openAPI interface. If you are an options market maker using the Market Maker Protection (MMP) feature, the maximum initial margin required for options open orders will be calculated based on the delta_limit and qty_limit in your MMP settings. When MMP is enabled, the system does not require initial margin for all open orders. Please note:
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Initial margin is calculated using MMP settings only when MMP is enabled. If MMP is not enabled, initial margin is calculated using the general rules defined in this article.
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To provide faster order submission, once you enable MMP for an underlying asset, the system will automatically cancel all options open orders without the MMP tag for that asset to ensure that no such orders exist when this function is enabled. If you have such orders, please cancel them before enabling MMP.
For market-making cooperation, contact us: Institutional@gate.com
The Portfolio Margin Mode of the Unified Account allows users to conduct spot trading (including spot margin trading), Perpetual futures trading , options trading.
Margin requirements are calculated using the VaR (Value at Risk) model. This mode supports cross-instrument risk offsets, where PnL across different positions can offset each other. Compared with Multi-Currency Margin Mode, Portfolio Margin Mode reduces overall margin requirements, improves capital efficiency, especially when using complex hedging strategies.
About Spot Hedging
You may enable or disable Spot Hedging.
- With Spot Hedging enabled, spot assets (spot equity, positive or negative), along with corresponding perpetual contracts and options contracts, are included in the risk unit margin calculation. Only part of the spot balance is used for risk offset, depending on the net delta of derivative positions. When this net delta changes, the spot assets involved in risk offset will adjust accordingly, and thus, the spot assets available for other trading purposes will also change.
Supposing the spot equity of the BTC you hold is 5 BTC, the net delta of BTC/USDT perpetual futures and options contracts is -4. In this case, about 4 BTC will be occupied for the risk offset to meet the margin requirements for derivatives, and the BTC spot available will become 1 BTC.
- With Spot Hedging disabled, spot assets will not be used for risk offset. However, they can still serve as margin as in Multi-Currency Mode.
Calculation of Maintenance Margin
The maintenance margin comprises two parts: the maintenance margin for all risk units, and the maintenance margin for borrowing funds.
The maintenance margin requirements for borrowing funds are the same as that in the Multi-Currency Margin mode. View More
The maintenance margin for a risk unit consists of the following parts:
1. MR1: Stress Testing
A risk unit comprises all positions of one underlying asset. For example, the BTC risk unit includes BTC spot, BTC/USDT Perpetual futures contracts, BTC/USDT options contracts. We designed a scenario matrix of stress testing based on the underlying price and the implied volatility to calculate the PnL of this risk unit in all stress testing scenarios (PnL = Position Value in the stress testing scenario - Actual Position Value). The MR1 result is the one with the smallest PnL.
Parameters configuration of MR1 is as follows:
| Risk Unit | Largest Price Volatility | IV Upside | IV Downside |
|---|---|---|---|
| BTC | 15% | 50% | 25% |
| ETH | 15% | 50% | 25% |
| SOL | 20% | 50% | 30% |
| DOGE | 25% | 60% | 30% |
| LTC | 25% | 60% | 30% |
| ADA | 25% | 60% | 30% |
| TON | 25% | 60% | 30% |
| XRP | 25% | 60% | 30% |
Example of Stress Testing:
2. MR2: Calendar Basis Risk
Calendar Basis Risk exists across assets of spot + perpetual + options within the same risk unit. This risk refers to the basis risk that occurred due to different expiration dates.
MR2 = USD Value of the Hedged Delta of Deltas at Different Expiration Dates × the Overall Time Difference of Expiration Dates of Positive Deltas and Negative Deltas × Calendar Basis Risk Coefficient
Expiration dates of spot and perpetual futures are manually set as 8:00 am (UTC+0) the next day.
The MR2-related parameter configuration is as follows:
| Risk Unit | Calendar Basis Risk Coefficient |
|---|---|
| BTC | 0.0004 |
| ETH | 0.0004 |
| SOL | 0.0004 |
| DOGE | 0.0004 |
| LTC | 0.0004 |
| ADA | 0.0004 |
| TON | 0.0004 |
| XRP | 0.0004 |
3. MR3: Calendar Volatility Risk
Calendar Volatility Risk only applies to options. It reflects implied volatility mismatches across different expiration dates.
MR3 = Hedged Vega of Vegas at Different Expiration Dates × the Overall Time Difference of Expiration Dates of Positive Vegas and Negative Vegas × Calendar Volatility Risk Coefficient
The MR3-related parameter configuration is as follows:
| Risk Unit | Calendar Volatility Risk Coefficient |
|---|---|
| BTC | 0.005 |
| ETH | 0.006 |
| SOL | 0.006 |
| DOGE | 0.006 |
| LTC | 0.006 |
| ADA | 0.006 |
| TON | 0.006 |
| XRP | 0.006 |
4. MR4: Option Shorting Risk
Options Shorting Risk only exists in options, which refers to the risks of shorting call options and put options.
MR4 = Nominal Value of Net Short Option Positions × Option Shorting Risk Coefficient
The MR4-related parameter configuration is as follows:
| Risk Unit | Option Shorting Risk Coefficient |
|---|---|
| BTC | 0.005 |
| ETH | 0.005 |
| SOL | 0.005 |
| DOGE | 0.005 |
| LTC | 0.005 |
| ADA | 0.005 |
| TON | 0.005 |
| XRP | 0.005 |
Calculation of Initial Margin
Initial Margin of the Risk Unit = max (Maintenance Margin of Portfolio 1, Maintenance Margin of Portfolio 2, Maintenance Margin of Portfolio 3) × 1.3
In this formula, Portfolio 1 is the position portfolio of the risk unit. Portfolio 2 is the position portfolio of the risk unit + open orders with positive delta. Portfolio 3 consists of the position portfolio of the risk unit + open orders with negative delta.
Open orders with positive and negative deltas are included in determining the initial margin requirements.
Account Initial Margin = Initial Margin of All Risk Units + Initial Margin of Borrowing Funds
The maintenance margin requirements for borrowing funds are the same as that in the Multi-Currency Margin mode.
Maintenance Margin Ratio and Initial Margin Ratio
In the Portfolio Margin mode, the formulas for calculating the Maintenance Margin Ratio and Initial Margin Ratio are the same as that in the Multi-Currency Margin mode.
Maintenance Margin Ratio = Margin Balance / Maintenance Margin
Initial Margin Ratio = Margin Balance / Initial Margin
In these formulas, Margin Balance is roughly the same as the one under the Multi-Currency Margin mode. The difference is that the options position value is added into the balance. Overall, Margin Balance represents the USD value of the account equity.
Risk Control Rules
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When the Initial Margin Ratio is above 100% and the account status is normal, the system will perform a trial calculation after you submit a new order. If the trial result shows that the Initial Margin Ratio will be below 100% after this order is placed, the order will be rejected.
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When the Initial Margin Ratio is below 100%, the system will auto-cancel your spot open orders to check if the Initial Margin Ratio is above 100%; if not, the system will start to cancel open orders of deriatives. In this scenario, you can only submit orders that can reduce account risks.
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When the Maintenance Margin Ratio drops to 100% or below, liquidation will be triggered. In this case, you can no longer trade with the Unified Account. But you can deposit more funds to stop the liquidation process.
Liquidation Process
The system will first cancel all open orders, starting with the most liquidation-efficient one. The system will check if the Maintenance Margin Ratio is back above 100% every time it finishes one execution. Liquidation will stop once the Maintenance Margin Ratio is back above 100%.
Step 1: DDH (Dynamic Delta Hedging)
For risk units with options positions, we will first perform DDH to reduce the risk exposure of delta of the risk unit. Please note that DDH could increase or decrease your perpetual futures positions.
Given the potential short-term volatility, our platform will not perform DDH frequently over a single risk unit, which means that DDH will only be performed once within the fixed period set by the risk control mechanism. The goal of this is to reduce unnecessary losses caused by DDH to your account.
Step 2: Reduce Hedging Positions
For risk units with no options position or in which MR2, rather than MR1, is in the predominant position, we will first reduce hedging positions to lower the margin requirements of MR2. Please note that this action could simultaneously reduce multiple different hedging positions.
Step 3: Normal Position Reduction
For risk units whose risks cannot be lowered by DDH or reducing hedging positions, we will directly reduce a single position to decrease the account's maintenance requirements, starting with the most liquidation-efficient one.
The system will control the transaction amount in every execution to avoid devastating impacts on the market liquidity. It is by default that the maximum position reduction will be configured in accordance with the liquidity in the derivative market.
Cover Liquidation Losses
If your account ends with negative balance, our platform will use insurance funds to cover the losses.
Portfolio Margin Trial Calculation and Application Scenarios
You can access our Portfolio margin calculator API to do a trial calculation and check the real-time margin requirements of the investment portfolio you are about to establish in the current market conditions.
Comparison of the Portfolio Margin Mode and Multi-Currency Margin Mode
Suppose you adopt a call spread strategy in options trading. You bought an options contract worth 1 BTC, BTC_USDT-20240426-70000-C, and sold BTC_USDT-20240426-80000-C, an options contract worth 1 BTC (whose mark price is 2,876 USDT). The spot price of BTC is 70,000 USDT.
In the Multi-Currency Margin mode, in which options trading is subjected to the original margin requirements, the maintenance margin of your Unified Account is:
7.5% × 70,000 + 2,876 = 8,126 USDT
Click to see the maintenance margin requirements for options short positions.
In the Portfolio Margin mode, your maintenance margin requirements are listed as follows:
MR1 (Stress Testing): 2,838 USDT
MR2 (Calendar Basis Risk): As the two contracts are expired on the same date, there’s no calendar basis risk. MR2 = 0
MR3 (Calendar Volatility Risk): As the two contracts expire on the same date, there’s no calendar volatility risk. MR3 = 0
MR4 (Option Shorting Risk): 352 USDT
Maintenance Margin of this Portfolio = MR1 + MR2 + MR3 + MR4 = 3,184 USDT
In conclusion, in the Portfolio Margin mode, the margin requirements are determined by the net delta risk exposure and net vega risk exposure of the investment portfolio, which is MR1; while MR2-4 are the ones supplemented to cover extra risks of the hedged delta, the hedged vega, and net short options positions.
In the Multi-Currency Margin mode, margin requirements for different positions are separately calculated. Hedging among positions to offset risks is not considered.
If you adopt hedging strategies to offset risks, the Portfolio Margin mode can reduce margin requirements and increase capital efficiency. However, it is worth noting that for multi-leg orders placed to offset risks, it is better to have them filled simultaneously to avoid the net risk exposure of the portfolio.
