Lyra supports two margin systems: Portfolio Margin and Standard Margin. This article focuses on Portfolio Margin, how it works, and who should use it. Learn more about Standard Margin here.
Portfolio Margin is not enabled by default for users. Learn how to enable Portfolio Margin here.
What is Portfolio Margin?
Portfolio Margin is a margin calculation technique based on the following insight: you should only be required to post as much margin as your maximum loss, and no more.
The calculation has three steps:
Step 1: Calculate the total PNL of all your positions (long options, short options, and perps) across 27 different shocked scenarios. Examples of a shocked scenario:
ETH price +20%, ETH implied volatility +100%
ETH price -20%, ETH implied volatility +50%
Step 2: Take the maximum loss calculated from the shocked scenarios.
E.g., your maximum loss might be $2,000 from a scenario where the ETH price drops 15% and implied volatility increases 100%.
Step 3: You are only required to post this maximum loss as your margin:
In the previous example, you’d need to post $2,000 worth of collateral (USDC) to meet your margin requirement.
When should you use Portfolio Margin?
Traders should use Portfolio Margin when they want the highest capital efficiency and are only interested in trading markets in isolation.
Benefits:
Best in class capital efficiency: up to 10x more capital efficient than Standard Margin
Considerations:
No cross-asset collateral: you can only deposit and use the cash/quote asset (USDC) for margin.
A Portfolio Margin subaccount only supports a single market.
An ETH Portfolio Margin subaccount can only trade ETH perpetuals and options.
A BTC Portfolio Margin subaccount can only trade BTC perpetuals and options.
You can create multiple Portfolio Margin subaccounts for different markets.
Complex margin calculations that may be hard to understand for beginners.
Learn more about Portfolio Margin in the documentation.