# Margin ### Two Margin Models Drake offers two distinct margin systems, each designed for different trading styles and risk preferences. #### Cross Margin Portfolio (CMP) **Unified Collateral Approach** All positions share a single pool of collateral. Your entire portfolio is evaluated as one unit, with profitable positions supporting losing positions. **Key Characteristics:** * One collateral pool backs all positions * Portfolio-wide margin calculation * Maximum capital efficiency * High leverage potential * All positions liquidate together if threshold breached **Best For:** * Experienced traders managing multiple positions * Diversified portfolios with offsetting positions * Maximizing capital efficiency * Traders comfortable with portfolio-level risk #### Isolated Margin Portfolio (IMP) **Separated Collateral Approach** Each position maintains its own dedicated collateral allocation. Positions operate independently with no interaction between them. **Key Characteristics:** * Separate collateral per position * Individual position risk management * Lower capital efficiency * Risk contained to specific positions * Only individual positions liquidate **Best For:** * Risk-conscious traders wanting position isolation * Testing new strategies with limited capital * High-risk speculative positions * Clear risk definition per trade *** ### Margin Mode Comparison
FeatureCross Margin (CMP)Isolated Margin (IMP)
Collateral StructureShared poolSeparate per position
Capital EfficiencyHighLower
Maximum LeverageInstrument-dependentInstrument-dependent
Liquidation RiskPortfolio-widePosition-specific
Position SupportProfits help lossesNo interaction
ComplexityHigherLower
Margin CalculationPortfolio-levelPosition-level
Collateral RequirementsLower totalHigher total
Risk ManagementPortfolio-level monitoringPer-position monitoring
Liquidation TriggerPortfolio ratio < 100%Individual position ratio < 100%
Liquidation ImpactAll positions close togetherOnly affected position closes
Margin UtilizationCan use 100% for all positionsMust allocate separately per position
Hedging BenefitPositions offset each otherNo cross-position benefit
#### Practical Example ``` Trader Capital: $20,000 Strategy: Open 3 positions Cross Margin Approach: - Deposit $20,000 once - Open Position A: $60,000 notional - Open Position B: $40,000 notional - Open Position C: $20,000 notional - Total: $120,000 notional (6x average leverage) - Single margin calculation across all Isolated Margin Approach: - Allocate $8,000 to Position A - Allocate $6,000 to Position B - Allocate $6,000 to Position C - Each position operates independently - Position A liquidates at -$8,000 (others unaffected) - Position B liquidates at -$6,000 (others unaffected) ``` *** ### Technical Architecture #### Cross Margin Portfolio (CMP) **Margin Calculation:** ``` Margin Ratio = (Total Adjusted Equity + Total Unrealized PnL) / Total Maintenance Margin ``` **Components:** * **Adjusted Equity:** Collateral value with asset-specific haircuts applied * **Unrealized PnL:** Sum of all open position profits/losses * **Maintenance Margin:** Sum of minimum requirements across all positions **Thresholds:** * Position opening: \~150% minimum * Withdrawals: \~150% must remain * Liquidation: \~100% triggers closure **Liquidation:** All positions close simultaneously when portfolio ratio drops below threshold. #### Isolated Margin Portfolio (IMP) **Margin Calculation:** ``` Position Margin Ratio = (Allocated Margin + Position PnL) / Position Maintenance Margin ``` **Components:** * **Allocated Margin:** Specific collateral assigned to position * **Position PnL:** Individual position profit/loss * **Maintenance Margin:** Minimum required for this position only **Position Independence:** ``` Position A: 250% ratio (healthy) Position B: 95% ratio (liquidates independently) Position C: 300% ratio (unaffected by Position B) Result: Only Position B closes, others continue ``` **Thresholds:** * Position opening: \~150% minimum * Margin transfers: \~150% must remain * Liquidation: \~100% triggers individual position closure **Liquidation:** Only the specific under-margined position closes. *** ### Leverage Mechanics Both systems support high leverage on select instruments, with maintenance requirements varying by asset volatility and liquidity. **Cross Margin:** ``` Effective Leverage = Total Position Notional / Total Portfolio Margin Example: Portfolio margin: $25,000 Total positions: $625,000 notional Effective leverage: 25x A 1% market move = 25% portfolio change ``` **Isolated Margin:** ``` Position Leverage = Position Notional / Allocated Position Margin Example: Position A: $125,000 notional, $5,000 allocated = 25x Position B: $30,000 notional, $3,000 allocated = 10x Position C: $20,000 notional, $10,000 allocated = 2x Each position's leverage independent ``` **Maintenance Requirements by Instrument:** ``` BTC, ETH (Highest liquidity): Lower maintenance requirements Higher leverage available Large-cap alts: Moderate maintenance requirements Moderate leverage available Mid/small-cap alts: Higher maintenance requirements Lower leverage available ``` *** ### Risk Profiles #### Cross Margin Risk **Advantages:** * Maximum capital utilization * Natural hedging between positions * Lower total collateral requirements * Flexibility to add positions **Risks:** * One bad position can liquidate entire portfolio * Complex portfolio-level monitoring required * Harder to isolate specific strategy performance * Cascade risk in extreme volatility **Example Scenario:** ``` Portfolio: 5 positions, 10x average leverage Position 1: -15% (losing $15k on $100k notional) Positions 2-5: Flat or small gains If Position 1 loss pushes portfolio ratio below 100%: → All 5 positions liquidate together → Even profitable positions close → Total portfolio impact, not isolated loss ``` #### Isolated Margin Risk **Advantages:** * Clear per-position risk definition * Liquidation limited to individual positions * Easier risk management and monitoring * Protected testing of new strategies **Risks:** * Lower capital efficiency * Higher total collateral requirements * Cannot leverage profits to support other positions * More fragmented capital allocation **Example Scenario:** ``` Position A: 25x leverage, high conviction BTC long Allocated: $4,000 margin Notional: $100,000 Market drops 4%: Position loses $4,000 (100% of allocated margin) Position A liquidates Other positions completely unaffected No cascade or contagion ``` --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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