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 margin floor is calculated as a percentage of spot notional for each net short option position:

$$\text{Floor} = \text{floor\_factor} \times S \times |\text{Net Short Options}|$$

The final margin requirement is:

$$\text{Margin} = \max(\text{Scenario Margin}, \text{Floor}) + \text{Gamma Kicker}$$

Option Contingency

For each strike, we identify the net short position and apply the floor factor:

Asset	Floor Factor	Description
BTC	1.5%	0.015 × spot per net short contract
ETH	1.5%	0.015 × spot per net short contract

Example: If you have 10 short BTC calls at strike 100,000 and 5 long BTC calls at strike 105,000, your net short is 5 contracts. With BTC at $100,000:

$$\text{Floor} = 0.015 \times \$100{,}000 \times 5 = \$7{,}500$$

Even if scenario analysis shows lower risk due to the spread, margin cannot drop below $7,500.

Short-Dated Gamma Kicker

Options expiring within 48 hours receive additional margin to account for rapid gamma acceleration:

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

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

This is additive. It applies on top of the floor or scenario margin, whichever is higher.

Parameters

Parameter	Description	Value
option_floor_factor	Floor % of notional for net shorts	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 Spot: $100,000

$$\text{Net short options} = 2$$ $$\text{Floor} = 0.015 \times \$100{,}000 \times 2 = \$3{,}000$$

Even if the strangle shows minimal scenario risk (both options are OTM), margin is at least $3,000.

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 Spot: $100,000

$$\text{Net short at 100,000 strike} = 10$$ $$\text{Floor} = 0.015 \times \$100{,}000 \times 10 = \$15{,}000$$

The long 105,000 calls still reduce scenario risk, but they do not remove the floor on the short 100,000 strike bucket. Margin is the larger of scenario risk and the strike-bucket floor, plus any short-dated gamma kicker.

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See also:

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