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 portfolio margin option floor uses a terminal-payoff basis, calculated separately for each underlying and expiry:

1. Net matching contracts: Net long and short quantities only when underlying, expiry, strike, and option type all match.
2. Calculate the isolated basis: Sum strike times net-short quantity across the remaining short call and put buckets.
3. Check the call tail: If total call quantity is net short, potential terminal losses are unbounded as spot rises. Retain the full isolated basis for that expiry group.
4. Recognize bounded losses: Otherwise, calculate the group's signed intrinsic payoff at terminal spot zero and every strike. Take the largest cash loss, or zero if no payoff is negative, and use the smaller of this loss and the isolated basis.

Premiums are excluded from this terminal-payoff basis. There is no floor credit across expiries or underlyings.

$$\text{Option Floor} = \sum_{u} \text{floor\_factor}_{u} \times \sum_{e} \text{Basis}_{u,e}$$

Here, $u$ identifies the underlying and $e$ the expiry. The final position margin requirement is:

$$\text{Margin} = \max(\text{Scanning Risk}, \text{Option Floor}) + \text{Gamma Overlay}$$

The floor is a percentage contingency, not a maximum-loss cap on margin. Scenario scanning risk still applies in full when it exceeds the floor. Independently fillable open orders reserve both their standalone risk and any existing floor protection their fills could remove. An unfilled buy cannot protect an independently executable sell. Combo legs are evaluated together, but separate combo orders can fill independently. Partial fills must leave the remaining orders funded.

Option Contingency

Asset	Default Floor Factor	Applied To
BTC	1.5%	Sum of expiry-scoped floor bases
ETH	1.5%	Sum of expiry-scoped floor bases

Example: Ten short BTC calls at strike 100,000 and five long BTC calls at strike 105,000, all at the same expiry, leave five net short calls in the upper tail. The full isolated basis remains $1,000,000, giving a floor of$15,000 at 1.5%. The long calls can reduce scanning risk but do not reduce this group's floor basis.

Short-Dated Gamma Kicker

Net-short option buckets with more than zero and at most 48 hours until expiry receive additional margin to account for rapid gamma acceleration:

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

$$\text{Gamma Kicker} = \text{kicker\_factor} \times S \times |\text{Short Options}_{0 < T \le 48h}|$$

Gamma remains separate. It nets only matching underlying, expiry, strike, and option type, with no cross-strike credit. It applies on top of the floor or scanning risk, whichever is higher.

Parameters

Parameter	Description	Value
option_floor_factor	Percentage of expiry-scoped floor basis	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, same expiry Spot: $100,000

$$\text{Isolated Basis} = \$90{,}000 + \$110{,}000 = \$200{,}000$$ $$\text{Floor} = 0.015 \times \$200{,}000 = \$3{,}000$$

The net-short call tail retains the isolated basis for the entire expiry group. Margin is at least $3,000 plus any gamma overlay, and can be higher when scanning risk dominates.

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, same expiry Spot: $100,000

$$\text{Terminal-Loss Basis} = (\$105{,}000 - \$100{,}000) \times 10 = \$50{,}000$$ $$\text{Floor} = 0.015 \times \$50{,}000 = \$750$$

The calls have no net-short upper tail, so the bounded terminal loss reduces the floor basis from $1,000,000 to$50,000. Margin is the larger of scanning risk and the $750 floor, plus any short-dated gamma overlay. The ten short calls still count toward gamma because the long calls have a different strike. Different expiries would receive no spread credit.

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See also:

• Portfolio Margin: Scenario-based margin calculation
• Standard Margin: Per-position margin formulas