A Portfolio Margin is a risk-based margin policy that uses Stress Testing (the mark price and implied volatility of the underlying asset) to calculate the overall risk of a portfolio. Under Stress Testing, when a Derivatives portfolio contains hedging positions, the margin required can offset each other partially. The specific offset amount is determined by Stress Testing results.

 

Currently, the Portfolio Margin mode is supported in the Unified Trading Account (UTA). In UTA, risk hedging could be applied between USDT Derivatives, USDC Derivatives, and Spot. However, only the margin calculation for Derivatives uses Stress Testing. The margin calculation for borrowing and negative Spot balance is the same between Cross Margin mode and Portfolio Margin mode within UTA.

 

 

 

 

Advantages of Portfolio Margin

Unlike Cross Margin, which is calculated based on individual positions, Portfolio Margin is calculated based on the risk of an entire portfolio. If you maintain a balanced portfolio with hedging positions, the Portfolio Margin mode will greatly reduce the margin required compared to the Cross Margin mode.

 

 

 

 

Margin Calculations under Portfolio Margin Mode

The total margin requirement for Portfolio Margin users consists of two parts: 

1. Total margin requirements for all Derivative positions, calculated with the below methodology. Please note that the Spot Hedging feature must be enabled when choosing the margin mode in order for Spot assets to be included in stress testing scenarios.

2. Margin requirements for all borrowed assets, calculated in the same way as in the Cross Margin mode.

 

 

 

 

Maintenance Margin

Maintenance Margin without Derivatives active orders

In the Unified Trading Account, Spot, USDC Derivatives, and USDT Derivatives of the same underlying will be calculated in the same risk unit. 

 

Take BTC and ETH as examples.

• BTCUSDC, BTCUSDT, and BTC Spot Assets will be calculated in the same risk unit.

• ETHUSDC, ETHUSDT, and ETH Spot Assets will be calculated in the same risk unit.

 

The Maintenance Margin calculation formula under the Portfolio Margin mode is:

Maintenance Margin = Maximum Loss + Contingency Components

 

 

 

1. Maximum loss

For each risk unit, Bybit will evaluate the underlying asset's mark price movement and implied volatility (IV) for Stress Testing to analyze the maximum loss under different market conditions and derive the margin required for the portfolio. Stress Testing scenarios may be slightly different for different risk units.

 

Example 1

Trader A holds 3 BTC sell Call Options. The Option details are as follows:

 

Underlying price: $30,000

IV: 100%

Option price: $1,000

Date of expiration: 30 days 

Underlying: BTC

 

Estimated Option price fluctuation under StressTesting scenarios:

Upper price: $33,000 

Lower price: $27,000 

IV: 120%

 

According to the estimated parameters, we can assume that Bybit calculates that the estimated price of the Option in the Stress Testing scenario is $2,500, and the maximum loss is $4,500 = ($2,500 − $1,000) × 3. This indicates that the margin occupied by this position is $4,500).

 

However, if Trader A holds a Perpetual Contract with long positions at the same time, the maximum loss of the Perpetual Contract, in this case, is −$3,000 = −($33,000 − $30,000). In this scenario, the maximum loss on Trader A’s account is calculated as $1,500 = $4,500 − $3,000. Thus, the margin required has dropped from $4,500 to $1,500 under the Portfolio Margin.

 

Similar to holding positions in Perpetual contracts, if traders have +1 BTC Spot holding in their UTA and activate Spot Hedging, it will achieve a similar hedging effect on their margins. In this case, the margin required under the Portfolio Margin mode will be reduced to around $1,500. 

 

As in the above case, when traders hold hedging positions, the margin requirement will be significantly reduced. In addition, when the market is highly volatile the estimated maximum loss is larger than when market volatility is low. Therefore, when the market is relatively stable and the IV is low, traders can hold more hedged positions to gain more profits.

 

Conversely, when the market fluctuates and the IV is high, the estimated maximum loss will increase, and the number of positions held by traders will be limited in order to protect the security of the trader's funds.

 

 

 

Preset Price Percentage Decay of Options near Expiration

Since the delivery price of the Option will be calculated using a time-weighted average price method 30 minutes before expiration, the sensitivity of the Option's final price w.r.t. the underlying, a.k.a. Delta will become smaller during the settlement period. During this period, the preset price percentage used in the scenario test calculation decreases as the expiration time approaches to reduce the user's maintenance margin. The formula for calculating the period is as follows:

 

Decayed Preset Price Percentage = Preset Price Percentage × (Seconds to Expiry / 1,800)

 

Assuming that in a scenario where 15% is used for the calculation, 15 minutes before the Option expires, the actual percentage used for testing is 7.5% based on the following calculation:

15% × (900 / 1,800)

 

 

 

2. Contingency Component

The contingency component is used by risk management to reserve the additional margin required for the position, in addition to the maximum loss of the position when the market is extremely volatile.

 

The contingency component consists of five parts:

 

 

 

A. Short Options Contingency: This is a margin generated when traders hold sell Call or sell Put Options.

 

Formula

Short Options Contingency = Net Short Options Nominal Value × Net Short Options Coefficient × Index Price.

 

*For specific Net Short Options Coefficients, please refer to the Margin Parameters page for Portfolio Margin. Please note that in extreme market conditions, Net Short Options Coefficients may be adjusted.

 

 

 

B. Vega Spread Contingency (Options): This is the margin occupation generated by Call and Put Options with different expiration dates.

 

Formula

Vega Spread Contingency = Time Difference in Days for positive/negative Vega positions * Vega Hedge Quantity * Vega Contingency Factor * Index Price

 

*For specific Vega Contingency Factor, please refer to the Margin Parameters page for Portfolio Margin. Please note that in extreme market conditions, the Vega Contingency Factor may be adjusted.

 

 

 

C. USDT-USDC-USD Spread Contingency: This margin requirement covers the fluctuation between USDC, USDT and USD exchange rates.

 

Formula

If there are hedged positions between USDT, USDC and Inverse contracts:

USDT-USDC-USD Spread Contingency =  [abs(Delta of USDT) + abs(Delta of USDC) + abs(Delta of USD) - abs(sum delta of derivatives)]/2 * USDT-USDC-USD Contingency factor ×BTCUSD index

 

If there are no hedging positions between USDT, USDC and Inverse contracts of certain coin, there will be no USDT-USDC-USD contingency since the maximum losses are covered in Stress Testing scenarios.

 

*For specific USDT-USDC-USD Contingency factors, please refer to the Margin Parameters page for Portfolio Margin. Please note that in extreme market conditions, the USDT-USDC Contingency factor may be adjusted.

 

 

 

D. Delta Spread Contingency

Let's take the BTC as an example, assuming you hold positions in BTC Options with different expiration dates, BTCUSDC Futures position, BTC-PERP Contracts position, and BTC Spot assets at the same time. The USDC Delta Contingency will be calculated as follows:

 

Step 1: Classify all positions in the BTC risk unit by expiration date and calculate the net delta of each expiration date.

 

 

Step 2: Calculate the delta of different maturities hedged against each other based on the following formula: 

Min[abs(Long Delta), abs(Short Delta)]

 

• Long Delta = Sum (Positive Net Delta of Expiration Date)

• Short Delta = Sum (Negative Net Delta of Expiration Date)

 

 

Step 3: Calculate the Combined Time Difference based on the following formula: 

ABS (TL - TS)

 

• TL is the number of days to expiration under delta weighting for all maturities with positive net delta

TL = Sum [(Days to expiration for maturities with positive net delta * ABS (Net delta for that maturity) / Sum (Delta for all maturities with positive net delta) ]

 

• TS is the number of days to expiration weighted by delta for all maturities with negative net delta

TS= Sum (((Days to expiration for maturities with negative net delta * ABS(Net delta for that maturity) / Sum (ABS(Delta for all maturities with negative net delta)))

 

 

Step 4: The USDC Delta Contingency is calculated based on the following formula: 

Combined Time Difference * Delta Position on the Hedge * BTC-USD Index * BTC's Delta Contingency Factor

 

Notes:

— For USDC Perpetual Contracts, we consider the set expiration date to be day 2, i.e. the number of days remaining to expiration is always one (1) day.

— The Delta Contingency Factor for BTC and ETH is 0.03%.

 

 

Step 5: If there are Spot holdings in the risk unit, the spread risk between Spot and Derivatives must be taken into account.

 

When Coin Equity > 0, the spread risk for Spot is calculated based on the following formula: 

abs(Spot Assets Used for Hedging) × Index Price × max (Weighted Basis × Basis Risk Factor / Index price - min(1- Collateral Value Ratio - 2%, Basis Margin of Safety), 0)

 

When Coin Equity < 0, the spread risk for Spot is calculated based on the following formula:

abs(Spot Assets Used for Hedging) × Index Price × max(Weighted Basis × Basis Risk Factor / Index Price - min (Maintenance Margin Ratio for Borrowed Assets - 2%, Basis Margin of Safety), 0)

 

When the net equity of the risk unit = 0, the basis risk for Spot is 0. 

 

 

Notes: 

— The Spot Assets Used in Hedging is the amount of Spot assets utilized for Hedging in Portfolio Margin mode. These Spot assets are involved in Stress Testing and may lower overall margin requirements. Consequently, these Spot assets cannot be transferred out of UTAs, but remain available for Spot trading (subject to order confirmation). We regularly calculate the maximum allocation of Spot assets for Hedging in Portfolio Margin mode and evaluate its potential P&L. We then compare the calculated amount with the existing Spot holdings within the UTA and select the one with the lower absolute value. Given the dynamic nature of derivatives trading, this value may vary in response to changing conditions in traders’ UTAs. In scenarios where a risk unit only contains Perpetual or Futures positions, the value is roughly equal to the Delta Value of the Derivatives multiplied by (-1). However, it cannot exceed the current Spot holdings within the UTA. 

 

— Not all spot assets are eligible for Spot Hedging under portfolio margin mode. The supported spot assets for Spot Hedging are:

 

 

— Basis Margin of Safety = 5% 

 

— Basis Risk Factor: BTC & ETH = 45%, Other Coin = 60%

 

— The Weighted Basis is a measure of the difference between the price of derivatives and the index price of the underlying asset. It is calculated by considering the varying expiration dates and sizes of different Derivatives positions.

 

 

 

E. Perpetual and Futures Contingency 

When it comes to Perpetual & Futures Contracts, including USDC Perpetual and Futures, USDT Perpetual as well as Inverse Perpetual and Futures, it is essential to calculate the contingency funds required as part of the margin.

 

Here's the formula to determine the contingency funds: 

Σabs (Quantity of USDC Perpetual and Futures + Quantity of USDT Perpetual + Quantity of Inverse Pereptual and Futures) × {{Risk Factor}} × Corresponding USD Index Price for each Contract

 

*For specific Risk Factors of  Perpetual and Futures Contingency, please refer to the Margin Parameters page for Portfolio Margin. Please note that in extreme market conditions, the Risk Factor may be adjusted.

 

Notes:

— Risk factors may be adjusted during extreme market conditions.

 

 

 

 

Maintenance Margin for Derivatives Active Orders

Bybit divides Derivatives active orders into two groups according to delta, one with positive delta and the other with negative delta. Then each group would be combined with Derivative positions to form a portfolio. The Derivative maintenance margin(MM) of the account is the largest MM between the two portfolios and Derivative positions.

 

Example

If the account has a positive delta open order A, a negative delta open order B, and position C, the Maintenance Margin for Derivatives under UTA = MAX (MMR (portfolio_C), MMR (portfolio_ [A + C]), MMR (portfolio_ [B + C]))

 

 

 

 

Initial Margin

Initial Margin = Maintenance Margin * IM Factor

 

*The IM Factor for each risk unit may vary depending on the actual situation. For specific IM Factor, please refer to the Margin Parameters page for Portfolio Margin.

 

 

 

 

Liquidation process

If the users have borrowed assets, the automatic repayment will be triggered when the maintenance margin rate reaches 85% until the borrowed amount is fully repaid.

 

If the users do not hold any borrowed assets, when the maintenance margin rate reaches 100%, all orders will be canceled, and partial liquidation will be triggered until the maintenance margin rate decreases to 90%.

 

For more details, please refer to Trading Rules: Liquidation Process (Unified Trading Account).