What are the applicable margin requirements

Margin requirements are calculated on portfolio level and consist of an initial margin requirement and a maintenance margin requirement. Your margin balance is compared to the applicable margin requirements to determine whether you can open, maintain or increase the risk of a position. 

Initial margin requirement

Initial margin is the margin you need to open a position or submit an order to increase the risk exposure of an existing position. Our initial margin requirement is based on three components: 

  1. Loss simulation: A number of scenarios are simulated and the potential loss for each scenario is calculated. In total we run about 50 different scenarios. Each scenario requires a certain coverage factor in function of how large the simulated change is (e.g. a 20% price change requires a coverage factor of 1, a 40% price change requires a coverage factor of 0.5). The purpose of loss simulation is mostly to account for risk due to changes in the price of BTC/ETH and changes in volatility. 
  2. Roll contingency: Additional margin requirement is added for positions with offsetting deltas in different maturities. This accounts for “roll risk”, i.e. a potential shift in the (perceived) interest rate across different maturities, and for the risk introduced by potential expiration of one side of a roll position. 
  3. Option contingency: Additional margin requirement is added for each short strike position. This accounts for certain structural portfolio risks that would otherwise be hard to calculate, such as volatility risks embedded in time spreads. 

If your margin balance falls below the initial margin requirement, you may only enter orders which do not increase your risk exposure. All of your open risk-increasing orders will be automatically cancelled. 

Maintenance margin requirement

Maintenance margin is the margin you need to keep an existing position open, which is set at 70% of the initial margin requirement. Upon a maintenance margin breach, you can no longer enter any new orders and all of your open orders will be automatically cancelled. Thalex will also start its risk mitigation process to remedy your maintenance margin breach. 

Maintenance Margin = Initial Margin x 0.7