Margin

Why sellers post margin

A bought option is paid for in full: the premium is the most you can lose, so there is nothing more to secure. A sold option is different. The seller receives the premium but owes the payout, which can be many times larger. The venue needs to know that money is there, so it requires margin: collateral held in the account (USD, a stablecoin or the coin itself) against the possible loss.

Two levels matter:

• Initial margin (IM) is what you need to open the position.
• Maintenance margin (MM) is the smaller amount you need to keep it open. Fall below it and the venue starts to liquidate.

Your equity is the collateral plus the open position valued at the venue's mark price. Utilization is maintenance margin divided by equity: at 100%, equity no longer covers maintenance margin and liquidation begins.

The standard model

In the standard (per-position) model, every sold option is margined on its own by a fixed formula, and legs never offset each other: a spread is charged as if its short leg were naked. Only sold options carry margin. For a short option with mark price m on an index at S, with OTM its out-of-the-money amount (S − strike for a put, strike − S for a call, never below zero), the published formulas reduce to:

• IM = max(15% × S − OTM, 10% × S) + m on Deribit and OKX; max(10% × S − OTM, 5% × S) + m on Bybit.
• MM = max(r × S, r × m) + m, with r = 7.5% on Deribit, 3% for calls and 5% for puts on OKX, and 3% (5% for ETH) on Bybit, which also adds 0.2% of S.

The mark is added in both because the short owes the option's current value on top of the buffer. The r × m term only matters for an option worth more than the index itself, so in practice MM is r × S + m. These are the venues' published rules for a new account as BOSS found them; tiers and account-wide offsets aren't modeled.

A worked example: one short put

BTC is at $100,000. You sell one 14-day short put at the $95,000 strike, marked at $1,800 (about 50% IV). The put is $5,000 out of the money.

Venue	Initial margin	Maintenance margin
Deribit	max($15,000 − $5,000, $10,000) + $1,800 = $11,800	$7,500 + $1,800 = $9,300
OKX	$11,800	$5,000 + $1,800 = $6,800
Bybit	max($10,000 − $5,000, $5,000) + $1,800 = $6,800	$3,000 + $1,800 + $200 = $5,000

To keep the arithmetic in dollars, this example simplifies: Deribit's BTC options are inverse and settle in BTC, so a real Deribit account would hold BTC, but BOSS's Paper trading lets you choose a USD account, and that is what is assumed here, with $20,000 of collateral. Selling the put brings in $1,800 and adds a $1,800 liability at the mark, so equity stays at $20,000 and utilization is $9,300 / $20,000 = 46.5%. If BTC drops to $90,000 and the put's mark rises to $6,650, the put is now in the money (OTM is zero): MM = max(7.5% × $90,000, 7.5% × $6,650) + $6,650 = $6,750 + $6,650 = $13,400, while equity falls to $20,000 + $1,800 − $6,650 = $15,150. Utilization is 88%, uncomfortably close to 100%.

Portfolio (scenario) margin

A portfolio margin model looks at the whole position instead of leg by leg. BOSS's scenario model follows Deribit's Portfolio Margin Engine and applies it to every venue: the position is revalued with Black-76 at underlying moves from −15% to +15% in 2.5% steps, each with no volatility change, a volatility shock up (45% of each leg's IV) and one down (30%), both scaled by (30 / days to expiry) raised to 0.3 under 30 days and 0.13 from 30 on. The worst loss on that grid, plus 1% of the index per net short contract at each strike, is the maintenance margin; initial margin is 120% of it.

For the naked put above, the worst case is a 15% drop with volatility shocked up: a loss of about $10,060, plus $1,000 contingency, for an MM of about $11,060 and an IM of about $13,280, more than the standard model. Portfolio margin does not favor naked options; it rewards offsetting ones. A short straddle at $100,000 needs $37,800 of initial margin on Deribit's standard model, its call and put each charged as naked, but only about $14,900 under the scenario model, because the two legs' losses never happen at the same time.

Coin-margined and USD-margined

Deribit's and OKX's BTC and ETH options are coin-margined: premiums, P&L and margin are in the coin, so a short put on coin collateral loses twice in a crash, once on the option and once on the collateral's value. Bybit's options settle in a stablecoin (USDC or USDT). See inverse vs. linear.