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# Margin requirements

Paradex supports two margin modes for Dated Options: **Cross Margin** for all users and **[Portfolio Margin](/risk/portfolio-margin)** (currently in beta for whitelisted users).

## Cross margin

#### Buying options

$$
\text{Margin} = \min\big(\text{Option Mark Price},
~\text{Long ITM Fraction} \times \text{Spot Price}\big)
$$

#### Selling options

$$
\begin{align*}
\text{Margin} = \max\big(
&\text{Short ITM Fraction} \times \text{Spot Price} - \text{OTM Amount}, \\
&\text{Short OTM Fraction} \times \text{Spot Price}\big)
\end{align*}
$$

where OTM Amount is:

* **Calls:** max(0, Strike Price - Spot Price)
* **Puts:** max(0, Spot Price - Strike Price)

### Cross margin parameters

#### BTC

| Parameter          |  IMR |  MMR |
| ------------------ | :--: | :--: |
| Premium Multiplier | 100% |  50% |
| Long ITM Fraction  |  20% |  10% |
| Short ITM Fraction |  15% | 7.5% |
| Short OTM Fraction |  10% |  5%  |
| Short Put Cap      |  50% |  25% |

#### ETH

| Parameter          |  IMR |  MMR |
| ------------------ | :--: | :--: |
| Premium Multiplier | 100% |  50% |
| Long ITM Fraction  |  20% |  10% |
| Short ITM Fraction |  15% | 7.5% |
| Short OTM Fraction |  10% |  5%  |
| Short Put Cap      |  50% |  25% |

#### HYPE

| Parameter          |  IMR |  MMR |
| ------------------ | :--: | :--: |
| Premium Multiplier | 100% |  50% |
| Long ITM Fraction  |  20% |  10% |
| Short ITM Fraction |  15% | 7.5% |
| Short OTM Fraction |  10% |  5%  |
| Short Put Cap      |  50% |  25% |

#### SOL

| Parameter          |  IMR  |  MMR  |
| ------------------ | :---: | :---: |
| Premium Multiplier |  100% |  50%  |
| Long ITM Fraction  | 25.0% | 12.5% |
| Short ITM Fraction | 18.0% |  9.0% |
| Short OTM Fraction | 12.0% |  6.0% |
| Short Put Cap      | 50.0% | 25.0% |

#### ZEC

| Parameter          |  IMR  |  MMR  |
| ------------------ | :---: | :---: |
| Premium Multiplier |  100% |  50%  |
| Long ITM Fraction  | 40.0% | 20.0% |
| Short ITM Fraction | 30.0% | 15.0% |
| Short OTM Fraction | 20.0% | 10.0% |
| Short Put Cap      | 50.0% | 25.0% |

#### US500

| Parameter          |  IMR |  MMR |
| ------------------ | :--: | :--: |
| Premium Multiplier | 100% |  50% |
| Long ITM Fraction  |  20% |  10% |
| Short ITM Fraction |  15% | 7.5% |
| Short OTM Fraction |  10% |  5%  |
| Short Put Cap      |  50% |  25% |

#### US100

| Parameter          |  IMR |  MMR |
| ------------------ | :--: | :--: |
| Premium Multiplier | 100% |  50% |
| Long ITM Fraction  |  20% |  10% |
| Short ITM Fraction |  15% | 7.5% |
| Short OTM Fraction |  10% |  5%  |
| Short Put Cap      |  50% |  25% |

#### XAU

| Parameter          |  IMR |  MMR |
| ------------------ | :--: | :--: |
| Premium Multiplier | 100% |  50% |
| Long ITM Fraction  |  20% |  10% |
| Short ITM Fraction |  15% | 7.5% |
| Short OTM Fraction |  10% |  5%  |
| Short Put Cap      |  50% |  25% |

#### CL

| Parameter          |  IMR |  MMR  |
| ------------------ | :--: | :---: |
| Premium Multiplier | 100% |  50%  |
| Long ITM Fraction  |  70% |  35%  |
| Short ITM Fraction |  50% |  25%  |
| Short OTM Fraction |  35% | 17.5% |
| Short Put Cap      |  50% |  25%  |

#### META

| Parameter          |  IMR |  MMR  |
| ------------------ | :--: | :---: |
| Premium Multiplier | 100% |  50%  |
| Long ITM Fraction  |  50% |  25%  |
| Short ITM Fraction |  35% | 17.5% |
| Short OTM Fraction |  25% | 12.5% |
| Short Put Cap      |  50% |  25%  |

#### SPCX

| Parameter          |  IMR |  MMR  |
| ------------------ | :--: | :---: |
| Premium Multiplier | 100% |  50%  |
| Long ITM Fraction  |  50% |  25%  |
| Short ITM Fraction |  35% | 17.5% |
| Short OTM Fraction |  25% | 12.5% |
| Short Put Cap      |  50% |  25%  |

### Option spread margin

Dated options on the same underlying with the same expiry can only settle at one
price. Charging each leg for its own worst case therefore charges for outcomes
that cannot happen together.

Paradex groups those options and charges the group the lesser of what its legs
cost separately and what the group can actually lose at settlement:

$$
\text{Group Margin} = \min\big(\text{Sum of Isolated Margins},
~\text{Max Settlement Loss} + \text{Unpaired Short Call Reserve}\big)
$$

Because the charge is a minimum, grouping can only lower a requirement, never
raise it.

* **Max Settlement Loss** — the worst the group can be worth at settlement,
  measured from its current mark value. The payoff only bends at a strike, so
  this is found by evaluating the group at zero and at each strike in it.
* **Unpaired Short Call Reserve** — a charge on calls left unpaired after
  longs and shorts net out:

$$
\text{Unpaired Short Call Reserve} = \text{Unpaired Scale}
\times \text{Net Short Calls} \times \text{Spot Price}
$$

A group that is net short calls loses without limit above its highest strike,
so there is no settlement price at which its loss stops growing. The reserve
covers a further `Unpaired Scale × Spot Price` of price movement per unpaired
contract. Groups that are not net short calls carry no reserve.

#### When the offset applies

* Both legs are **dated options on the same underlying, expiring on the same
  day**. Perpetual options are not grouped.
* The group holds **at least one short position**. A group of only long options
  cannot lose more than the premium paid for it, so grouping it would remove the
  buffer a long option is margined with.
* **Open orders count at initial margin.** A resting order is a position you can
  reach without another margin check, so it is priced into the group as though
  it had filled. Maintenance margin charges positions only.

#### Example

Spot BTC is 100,000. You buy one 100,000 call and sell one 110,000 call, both
expiring on the same day.

| Leg                    |  Mark | Isolated margin                                           |
| ---------------------- | :---: | --------------------------------------------------------- |
| Long 1 × 100,000 call  | 4,000 | `min(4,000, 20% × 100,000)` = **4,000**                   |
| Short 1 × 110,000 call | 1,500 | `max(15% × 100,000 − 10,000, 10% × 100,000)` = **10,000** |
|                        |       | Sum: **14,000**                                           |

Margined separately the spread costs 14,000. But the two legs are one position:
you paid 4,000 and received 1,500, so you hold 2,500 of value, and the worst
that can happen is that both calls expire worthless and you lose it.

* **Max Settlement Loss** = 2,500
* **Net Short Calls** = 1 short − 1 long = 0, so the reserve is 0

$$
\text{Group Margin} = \min(14{,}000,~2{,}500 + 0) = 2{,}500
$$

The spread is charged 2,500 instead of 14,000 — an 82% reduction, and exactly
what the position can lose.

> **Note**
>
> The cap is the group's mark to market loss, so it falls as the spread loses
> value. A capped spread's margin requirement and its unrealised loss move
> together, which means the group does not consume free collateral as it moves
> against you. It also means a fully capped spread carries the same initial and
> maintenance requirement.

#### Option spread margin parameters

The Unpaired Scale is the same for every underlying.

| Parameter      | IMR | MMR |
| -------------- | :-: | :-: |
| Unpaired Scale | 1.2 | 1.0 |