Investment Portfolio Margin Account: Cross-Margin Trading Rules

In the world of digital asset trading, efficiency and risk management go hand in hand. The Investment Portfolio Margin (PM) account model is a powerful tool designed to help advanced traders maximize capital utilization while maintaining robust risk controls. This comprehensive guide explains how PM accounts work, their benefits, eligibility requirements, and the sophisticated risk models that underpin them.

What Is an Investment Portfolio Margin Account?

An Investment Portfolio Margin (PM) account allows users to trade across spot, margin, perpetual contracts, futures, and options within a single unified account. Unlike isolated margin systems, PM accounts use a risk-based model to calculate margin requirements by analyzing the combined exposure of all positions.

This approach enables risk offsetting between correlated assets—such as long spot and short futures—reducing overall margin needs without compromising safety. All assets are converted into USD equivalents for consistent measurement of initial and maintenance margin, similar to cross-currency margin modes.

👉 Discover how portfolio margining can boost your trading efficiency

How Does Portfolio Margining Reduce Capital Requirements?

The key advantage of PM accounts lies in risk netting across multiple instruments. Instead of treating each position independently, the system evaluates how different positions interact under various market stress scenarios.

Risk Unit Consolidation

Positions with the same underlying asset—like ETH/USDT perpetuals, ETHUSD futures, and ETH options—are grouped into a single risk unit. This consolidation allows offsetting gains in one instrument to reduce the margin needed for losses in another.

For example:

• A long ETH spot position may partially or fully offset a short ETH perpetual contract.
• An options delta hedge can be recognized within the same risk unit, lowering required collateral.

Automatic Spot Hedging

In upgraded PM models, spot holdings are automatically included in hedging calculations when they counterbalance derivative exposures. If you hold ETH spot and are short ETH derivatives, the system recognizes this natural hedge and reduces your margin burden accordingly.

This dynamic integration enhances capital efficiency, especially for traders employing complex strategies like cash-and-carry or volatility arbitrage.

Eligibility Criteria for PM Account Activation

To ensure responsible usage, access to portfolio margining is restricted to qualified users:

1. Minimum Net Asset Value: You must maintain at least $10,000 in net assets.
2. Knowledge Declaration: Users must confirm they understand the mechanics and risks associated with portfolio margin trading.

These requirements help protect inexperienced traders from overleveraging while enabling professionals to leverage advanced tools.

How Is Portfolio Margin Calculated?

Margin calculation in a PM account is based on stress-testing each risk unit under extreme market conditions. The goal is to estimate the maximum potential loss—the Maintenance Margin Requirement (MMR)—across multiple risk dimensions.

Key Components of MMR

• Derivatives MMR: Aggregated from all derivative positions (perpetuals, futures, options).
• Borrowing MMR: Covers liabilities from leveraged positions.
• Portfolio MMR: Sum of all risk units’ MMR expressed in USD value.

Initial Margin Requirement (IMR) is derived as:
IMR = 1.3 × Derivatives MMR + Borrowing IMR

Derivatives Margin Calculation (MMR)

Six core risk factors (MR1–MR6), plus liquidation costs (MR7) and stablecoin depeg risk (MR9), are evaluated:

The final Derivatives MMR is calculated as:
max((max(MR1, MR2, MR6) + MR3 + MR4 + MR5 + MR9), MR7)

👉 See how your current positions would perform under stress tests

Spot Hedging Allocation Rules

Only hedged spot positions count toward margin reduction. The amount used depends on delta alignment:

• If holding long spot and short delta derivatives, hedging usage = min(|spot|, |derivative delta|, user-defined limit)
• If holding short borrowed spot and long delta derivatives, similar logic applies
• No hedging benefit if directions don’t oppose each other

This ensures only genuine hedges reduce margin requirements.

Managing Borrowing and Leverage

Users can choose between auto-borrow and non-auto-borrow modes.

Auto-Borrow Mode

When a currency balance is insufficient but overall USD equity is healthy:

• You can still sell spot or open contracts denominated in that currency.
• The system creates potential liability, which accrues interest if actual negative balance occurs.

Non-Auto-Borrow Mode

You can only trade using available balances. However:

• If overall portfolio value remains strong, potential borrowing may still occur passively.
• If liabilities exceed interest-free thresholds, automatic currency conversion kicks in—selling positive assets (usually into USDT) to cover debts.

Borrowing impacts include:

• Pre-funded fees
• Unrealized P&L from derivatives
• Realized losses
• Cross-margin borrowing limits

Monitoring Margin Health: Maintenance Margin Rate

Your account’s health is measured by the Portfolio Maintenance Margin Rate, calculated as:

Portfolio USD Value ÷ Required Margin (in USD)

A rate below 100% triggers forced deleveraging. A warning is sent when it drops below 300%.

Forced Deleveraging Process

When margin levels fall critically low (<100%), the system initiates a structured response:

Step 1: Stablecoin Dynamic Delta Hedge (DDH1)

Activates when MR9 (depeg risk) dominates. Adjusts perpetual/futures positions to hedge against USDT/USDC devaluation scenarios.

Step 2: General Dynamic Delta Hedge (DDH2)

Used when price or volatility shocks (MR1/MR6) are primary risks—e.g., BTC drops 15%. Rebalances futures/perpetuals to stabilize delta exposure.

Step 3: Basis Risk Hedging

Targets the highest basis risk unit. Reduces offsetting positions across maturities (e.g., spot vs. futures) to minimize divergence risk.

Step 4: Standard Position Reduction

Systematically closes positions that improve margin health most efficiently. Uses liquidity data and stepwise reduction until the account reaches safety (>110% margin rate).

Simulate Your Portfolio Before Trading

Before activating PM mode or adjusting positions:

✅ Use the Portfolio Builder tool
✅ Test via API integration

These tools let you:

• Model new trades alongside existing ones
• Preview IMR/MMR impacts
• Hover over metrics to see breakdowns per risk scenario

This simulation capability empowers informed decision-making.

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Frequently Asked Questions (FAQ)

Q: Can I use portfolio margin with small accounts?

No. You need at least $10,000 in net assets to qualify. This threshold ensures users have sufficient buffer against market volatility.

Q: Does holding spot always reduce my margin?

Only if your spot position offsets derivative risk (e.g., long spot vs. short futures). Unhedged spot doesn’t contribute to margin reduction.

Q: What happens during forced deleveraging?

The system follows a four-step process: stablecoin hedging, general delta adjustment, basis risk reduction, then direct position closures—until margin health recovers above 110%.

Q: How are stablecoin depeg risks calculated?

Using MR9, the system measures cross-denomination hedges (e.g., USDT vs USD futures). It applies tiered risk factors based on depeg severity and hedge size—up to 40% in extreme cases.

Q: Are there hidden costs in portfolio margining?

While no extra fees apply, slippage and funding costs are factored into MR7. Larger positions face scaled liquidation cost multipliers (up to 12×).

Q: Can I switch back to isolated margin?

Yes. You can change margin modes anytime, but ensure your positions meet the new mode’s requirements to avoid liquidation.

Final Thoughts: Maximizing Strategy with Smarter Margining

The Investment Portfolio Margin account isn't just about saving capital—it's about enabling sophisticated trading strategies with intelligent risk recognition. By understanding how spot, futures, and options interact under stress-tested models, traders gain both flexibility and protection.

Whether you're running delta-neutral options books or managing macro hedges across multiple tenors, PM accounts provide the infrastructure needed for professional-grade execution.

👉 Start optimizing your trading strategy with portfolio margin today