Portfolio margin
Also called: PM · portfolio margin mode
Definition
Portfolio margin is a margin system that sets your collateral requirement based on the combined risk of all your positions, so hedged positions need less margin than they would separately.
This entry is shown in English.
How Portfolio margin works
Standard margin looks at each position, or each asset, on its own. Portfolio margin runs scenarios across your whole account, for example moving prices and volatility up and down by set amounts, and asks how much the entire portfolio could lose. Your requirement is based on that worst-case result.
If you hold offsetting positions, such as spot BTC and a BTC short perpetual, or options hedged with futures, the losses in one scenario are partly cancelled by gains in another. Portfolio margin recognises that, so you need less collateral and can use capital more efficiently.
It is aimed at advanced traders. Exchanges such as Binance, OKX, Bybit and Deribit offer portfolio margin modes, often with minimum account sizes, eligibility checks or limits on which assets qualify. The lower margin can also mean higher effective leverage, so a portfolio that is not truly hedged can be liquidated quickly. Methods and requirements differ by exchange.
Example
Suppose you hold 2 BTC spot and short 2 BTC on a perpetual at 60,000 USDT. Under standard rules the short might need, say, 10% margin, or 12,000 USDT, on its own. Under portfolio margin, a 15% price drop would lose 18,000 USDT on the spot side but gain about 18,000 on the short. The net scenario loss is close to zero, so the requirement might be only a small fraction of 12,000 USDT, depending on the exchange's model.
Common mistakes
- Assuming any mix of positions is hedged, when correlations can break in a crash.
- Using the freed-up margin to add unhedged risk.
- Ignoring that the exchange can change scenario parameters and raise margin requirements.
Learn and practise
FAQ
What is the difference between cross margin and portfolio margin?
Cross margin shares one balance across positions but usually sums each position's requirement. Portfolio margin goes further and nets out offsetting risk between positions.
Who should use portfolio margin?
Experienced traders running hedged strategies, options books or basis trades. For simple directional trading it adds complexity without much benefit.