Cross Margin
Cross Margin Portfolio
A cross margin portfolio, also known as a cross-margin account, is a type of trading account where the margin requirements for all positions are combined or "crossed" together. In other words, the margin available in the account can be used to support any position within the portfolio, regardless of the individual margin requirements for each position.
A cross margin portfolio, also known as a cross-margin account, is a type of trading account where the margin requirements for all positions are combined or "crossed" together. In other words, the margin available in the account can be used to support any position within the portfolio, regardless of the individual margin requirements for each position.
In a cross margin portfolio:
Margin Efficiency: Cross margining allows for more efficient use of capital since the margin required for one position can be offset by the margin excess from another position within the same account. This can potentially free up capital that would otherwise be locked up in isolated margin accounts.
Reduced Liquidation Risk: Because margin is pooled across all positions, there's less risk of individual positions being liquidated due to margin deficiencies. This can be particularly beneficial in volatile markets where margin requirements may fluctuate rapidly.
Simplified Management: Managing a single margin account with cross-margining can be simpler than managing multiple isolated margin accounts. Traders can more easily monitor their overall margin utilization and risk exposure.
Increased Leverage: Cross margining can allow for increased leverage compared to isolated margin accounts since margin requirements are calculated based on the net risk of the entire portfolio rather than individual positions.
support more hedge strategy
However, it's important to note that while cross margining can offer advantages in terms of efficiency and risk management, it also carries its own set of risks. Since margin is pooled across all positions, losses in one position can potentially impact the margin available for other positions, leading to increased risk if not managed properly.
Traders utilizing cross margin portfolios should closely monitor their margin levels and risk exposure to ensure they maintain adequate coverage and avoid potential margin calls or liquidation events. Proper risk management practices, including setting stop-loss orders and managing position sizes, are essential for trading success in any margin account, including those with cross-margining.
Assets
Under cross margin account mode, the assets will be displayed as below:
Liquidation
Cross-margin trading mode involves two levels of liquidation: position liquidation and portfolio liquidation.
Position Liquidation:
When the margin ratio of the cross-margin portfolio falls below 110%, any open positions on this portfolio can be liquidated.
Portfolio Liquidation:
When the margin ratio of the cross-margin portfolio falls below 105%, the entire portfolio will be liquidated.
cross margin ratio formula
(adjusted equity + unrealized PnL) / maintainence margin
maintainence margin = portfolio margin * maintenance margin ratio (5%)
If a position is liquidated, users can find the record in their order history labeled as "liquidation".
Cross Margin Collateral Swap
In cross-margin portfolios, users can swap the available balance. Drake currently routes swap order flow to Uniswap V3 AMM pool. However, to safeguard the portfolio from liquidation, Drake prohibits any swap that would result in a low portfolio margin ratio, ensuring it remains at least 200%.
