Margin calculation specifics

This article describes how the system calculates margin for equities and options based on the margin profile settings. The calculated values are displayed in the Position margin, Order margin, Cash margin, and Margin available indicators of the account summary.

Equities

Price used in the calculation

Position margin is calculated from the position market value:

• a long position is valued at the bid price;
• a short position is valued at the ask price.

If there is no quote for the instrument, the average position price is used.

Example: A long position of 10 shares, bid = 82.11 USD, Maintenance rate = 25%. Position margin = 10 x 25% x 82.11 = 205.28 USD

For the Tiered leverage type, order margin is calculated from the order price, not the market price: Amount x Order price x Initial. While the order is active, its margin does not change with the market.

The commission that will be charged when the order is executed is added to the order margin. In the Margin usage orders sidepage, which opens from the Margin usage column in the Assets ➝ Balance tab of the account, the commission is displayed as a separate line.

Instruments without margin leverage

If no leverage is set for the instrument's group in the account's margin profile, position margin equals 100% of the position market value. In this case, a short position in an equity or a bond cannot be opened: the order is rejected with the short not available message. A short order is rejected in the same way if no Short levels are configured for the Tiered leverage.

Cash margin

If the account has no funds in the position currency, the shortage of this currency is included in the Cash margin indicator. It does not replace position margin but is added to it:

Margin usage = Position margin + Cash margin + Order margin

Please note! Buying an instrument without margin leverage in a currency that the account does not hold may require about 200% of the position value: 100% for position margin and about another 100% for cash margin.

Options

Option margin parameters (Rate A, Rate B, Covered, Vertical spreads) and formulas are described in the Option margin section of the Margin profiles article. Below is what these calculations mean for the account.

Buying an option

Margin for a long option equals 100% of its market value at the bid price. If there is no quote for the option, the premium paid is used.

The value of a long option is included in the account's Margin balance and, at the same time, goes entirely into Margin usage. Therefore, buying an option reduces Margin available by its full value, while buying a marginable equity reduces it by only part of the value.

Example: The account holds 10 USD and has no positions: Margin balance = 10 USD, Margin available = 10 USD.

An option is bought for 10 USD: Margin balance = 10 USD, Margin usage = 100% x 10 = 10 USD, Margin available = 0 USD.

An equity is bought for 10 USD at a 20% rate: Margin balance = 10 USD, Margin usage = 20% x 10 = 2 USD, Margin available = 8 USD. {.is-info}

Selling an option

Margin for a short option that is not part of a strategy is the greater of A and B:

• A reflects the exercise risk: the Rate A percentage of the underlying asset market value, minus how far the option is out of the money, plus the premium received. The closer the underlying price is to the strike, or the deeper the option is in the money, the greater A is;
• B is the minimum requirement: the Rate B percentage plus the premium. For a Call, the percentage is taken of the underlying asset market value; for a Put, of the strike. B prevents margin from dropping almost to zero when the option is far out of the money.

The underlying price in the calculation is always the ask price, for both Call and Put. If there is no quote for the underlying asset, or the option and the underlying asset are quoted in different currencies, margin is calculated from the strike and does not depend on the market.

Option order margin

Unlike an equity order, the margin of an option order is recalculated with the underlying price while the order is active.

The system calculates the margin of all positions on the underlying asset twice: as they are, and as if the active orders on it were executed. Order margin is the difference between these values.

• A sell order is calculated using the A and B formula with the premium at the order price.
• A buy order is calculated as 100% of the option price.

The order commission is added to this amount.

Please note! The Margin usage orders and Margin usage positions sidepages show a preliminary estimate for options that does not depend on the underlying price. For a sell order and a short position, it is Rate A x Strike value x Amount x Multiplier + the premium (at the order price or Entry Premium); for a buy order, Price x Amount x Multiplier. Therefore, the amount in the sidepage may differ from the Order margin and Position margin indicators in the account summary. The current margin value is shown in the summary.

Option expiration

When closing expired positions, the system compares the strike with the Underlying rate:

• an out-of-the-money option is closed without exercise, and the premium remains with the seller;
• an in-the-money option is exercised. If the Is deliverable checkbox is enabled in the option instrument card, a position in the underlying asset is opened on the account at the strike price: exercise of a short put opens a long position, exercise of a short call opens a short position. If the checkbox is disabled, the option is cash-settled at its intrinsic value, and no position in the underlying asset is opened.

After delivery, margin for the new position is calculated using the leverage settings for equities.

Please note! Before explaining the expiration outcome to a client, check the instrument's Is deliverable checkbox: with delivery, a position in the underlying asset appears on the account and requires margin.

Account restrictions

You can increase margin requirements when one or two positions make up a large share of the portfolio in the Concentrations tab.

You can prohibit opening and increasing positions while the account funds are below a threshold in the Min margin balances tab.