Margin Floor

The margin floor ensures portfolios maintain minimum margin requirements even when hedged positions offset each other in scenario analysis.

Overview

Scenario-based margin can underestimate risk when:

Spreads appear perfectly hedged but have path-dependent risk
Gamma accelerates near expiry faster than discrete scenarios capture
Correlation assumptions break down during extreme moves

The floor acts as a backstop: a minimum margin that applies regardless of how favorable the scenario analysis looks.

How It Works

The margin floor is calculated as a percentage of spot notional for each net short option position:

\text{Floor} = \text{floor\_factor} \times S \times |\text{Net Short Options}|

The final margin requirement is:

\text{Margin} = \max(\text{Scenario Margin}, \text{Floor}) + \text{Gamma Kicker}

Option Contingency

For each strike, we identify the net short position and apply the floor factor:

Asset	Floor Factor	Description
BTC	1.5%	0.015 × spot per net short contract
ETH	1.5%	0.015 × spot per net short contract

Example: If you have 10 short BTC calls at strike 100,000 and 5 long BTC calls at strike 105,000, your net short is 5 contracts. With BTC at $100,000:

\text{Floor} = 0.015 \times \$100{,}000 \times 5 = \$7{,}500

Even if scenario analysis shows lower risk due to the spread, margin cannot drop below $7,500.

Short-Dated Gamma Kicker

Options expiring within 48 hours receive additional margin to account for rapid gamma acceleration:

Parameter	Value
Expiry threshold	48 hours
Kicker factor	1.0% of spot per short contract

\text{Gamma Kicker} = \text{kicker\_factor} \times S \times |\text{Short Options}_{T < 48h}|

This is additive. It applies on top of the floor or scenario margin, whichever is higher.

Parameters

Parameter	Description	Value
`option_floor_factor`	Floor % of notional for net shorts	1.5%
`gamma_kicker_factor`	Extra % for short-dated options	1.0%
`expiry_threshold`	Time window for gamma kicker	48 hours

Examples

Example 1: Short Strangle

Position: Short 1 BTC 90,000 put + Short 1 BTC 110,000 call Spot: $100,000

\text{Net short options} = 2

\text{Floor} = 0.015 \times \$100{,}000 \times 2 = \$3{,}000

Even if the strangle shows minimal scenario risk (both options are OTM), margin is at least $3,000.

Example 2: Near-Expiry Position

Position: Short 5 BTC 100,000 calls expiring in 24 hours Spot: $100,000

\text{Floor} = 0.015 \times \$100{,}000 \times 5 = \$7{,}500

\text{Gamma Kicker} = 0.01 \times \$100{,}000 \times 5 = \$5{,}000

\text{Minimum Margin} = \$7{,}500 + \$5{,}000 = \$12{,}500

Example 3: Hedged Spread

Position: Short 10 BTC 100,000 calls + Long 10 BTC 105,000 calls Spot: $100,000

\text{Net short} = 0 \quad \text{(fully hedged at each strike)}

\text{Floor} = 0.015 \times \$100{,}000 \times 0 = \$0

The spread has no floor because there's no net short exposure. Margin is determined purely by scenario analysis of the spread's max loss.

Overview​

How It Works​

Option Contingency​

Short-Dated Gamma Kicker​

Parameters​

Examples​

Example 1: Short Strangle​

Example 2: Near-Expiry Position​

Example 3: Hedged Spread​