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
Collateral Structure
Shared pool
Separate per position
Capital Efficiency
High
Lower
Maximum Leverage
Instrument-dependent
Instrument-dependent
Liquidation Risk
Portfolio-wide
Position-specific
Position Support
Profits help losses
No interaction
Complexity
Higher
Lower
Margin Calculation
Portfolio-level
Position-level
Collateral Requirements
Lower total
Higher total
Risk Management
Portfolio-level monitoring
Per-position monitoring
Liquidation Trigger
Portfolio ratio < 100%
Individual position ratio < 100%
Liquidation Impact
All positions close together
Only affected position closes
Margin Utilization
Can use 100% for all positions
Must allocate separately per position
Hedging Benefit
Positions offset each other
No 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 MarginComponents:
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 MarginComponents:
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 continueThresholds:
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 changeIsolated 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 independentMaintenance 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 availableRisk 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 lossIsolated 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 contagionLast updated