Basic definitions
- Premium: The fee paid by the option buyer to the seller to obtain the right to exercise the option upon expiration.
- OTM Moneyness: Measures how far an out-of-the-money (OTM) option is from the underlying price. At-the-money (ATM) and in-the-money (ITM) options have a moneyness of 0.
- Initial Margin: Also known as Opening Margin, it is the minimum margin required to open a position.
- Maintenance Margin: The minimum margin required to keep a position from being liquidated. If the position margin falls to or below this level, liquidation will be triggered.
- Order Margin: Funds that are frozen when placing an order to ensure proper execution—guaranteeing that the buyer can fully pay the premium and the seller has sufficient margin to maintain the position, while also preventing excessive cost-free order placement.
Premium calculation
| Transaction Type | Formula |
|---|---|
| Buy Call/Put Options | Premium = Order Price × abs(Order Amount) × Contract Multiplier |
Example: Buy 1 BTC call option at an order price of $220, with a contract multiplier of 0.01. Premium = 220 × 1 × 0.01 = $2.20
OTM moneyness
| Option Type | Formula |
|---|---|
| Call Options | OTM = max(0, Strike Price – Underlying Price) |
| Put Options | OTM = max(Underlying Price – Strike Price, 0) |
Example
- Underlying price: $115,000, Strike price: $116,000, Call option → OTM = 1,000
- Underlying price: $115,000, Strike price: $112,000, Put option → OTM = 3,000
Initial margin calculation
| Option Type | Formula |
|---|---|
| Sell Call Options | [max(Initial Margin Ratio 1 × Underlying Price, Initial Margin Ratio 2 × Underlying Price – OTM) + Mark Price] × abs(Position Size) × Contract Multiplier |
| Sell Put Options | [max(Initial Margin Ratio 1 × Underlying Price × (1 + Mark Price / Underlying Price), Initial Margin Ratio 2 × Underlying Price – OTM) + Mark Price] × abs(Position Size) × Contract Multiplier |
Example (Sell call options)
- Underlying price: $115,000, Strike price: $116,000, OTM: 1,000, Mark price: $200, Contract multiplier: 0.01. Initial Margin = [max(0.10 × 115,000, 0.15 × 115,000 – 1,000) + 200] × 0.01 = [max(11,500, 16,250) + 200] × 0.01 = 16,450 × 0.01 = $164.50
Example (Sell put options)
- Underlying price: $115,000, Strike price: $112,000, OTM: 3,000, Mark price: $150.
- Initial Margin = [max(0.10 × 115,000 × (1 + 150/115, 000), 0.15 × 115,000 – 3,000) + 150] × 0.01 = [max(11,515, 14,250) + 150] × 0.01 = 14,400 × 0.01 = $144.00
Maintenance margin calculation
| Option Type | Formula |
|---|---|
| Sell Call Options | (Maintenance Margin Ratio × Underlying Price + Mark Price) × abs(Position Size) × Contract Multiplier |
| Sell Put Options | [max(Maintenance Margin Ratio × Underlying Price, Maintenance Margin Ratio × Mark Price) + Mark Price] × abs(Position Size) × Contract Multiplier |
Example (Sell call options)
- Underlying price: $115,000, Mark price: $200, Contract multiplier 0.01.
- Maintenance Margin = (0.075 × 115,000 + 200) × 0.01 = 8,825 × 0.01 = $88.25
Example (Sell put options)
- Underlying price: $115,000, Mark price: $150.
- Maintenance Margin = [max(0.075 × 115,000, 0.075 × 150) + 150] × 0.01 = [max(8,625, 11.25) + 150] × 0.01 = 8,775 × 0.01 =$87.75
Order margin calculation
| Transaction Type | Formula |
|---|---|
| Buy Options | Order Margin = Premium + Fees |
| Sell options | Premium = min(Mark Price, Order Price) × abs(Order Amount) × Contract Multiplier Order Margin = max(Initial Margin – Premium, 0) + Fees |
Example (Sell orders)
- Sell BTC call option with order price $210, Mark price $200
- Premium = min(200, 210) × 0.01 = $2.00
- Initial Margin = $164.50
- Order Margin = max(164.50 – 2.00, 0) + Fees (1) = $163.50
Equity and margin ratio
| Item | Formula |
|---|---|
| Position Value | Mark Price × Position Size × Contract Multiplier |
| Total Position Value | Σ(Mark Price × Position Size × Contract Multiplier) |
| Equity | Account Balance + Total Position Value |
| Equity at Strike Price | Account Balance + Σ(Mark Price × Long Positions × Contract Multiplier) + Σ(Max Strike Price × Short Positions × Contract Multiplier) |
| Available Balance | Account Balance – Maintenance Margin – Sell Order Margin – Buy Order Margin |
| Margin Ratio | (Maintenance Margin + Sell Order Margin) / Equity × 100% |
Example
Account Balance: $5,000 1 Short call position, Maintenance margin: $88.25, Position Value: -$2.00 Equity = 5,000 – 2 = $4,998 Margin Ratio = 88.25 / 4,998 × 100% ≈ 1.77%
Fees
| Type | Formula |
|---|---|
| Trading | min(Trading Fee Rate × Underlying Price, 0.1 × Order Price) × abs(Order Amount) × Contract Multiplier |
| Call Option Settlement | min(Settlement Fee Rate × Settlement Price, 0.1 × (Settlement Price – Strike Price)) × abs(Position Size) × Contract Multiplier |
| Put Option Settlement | min(Settlement Fee Rate × Settlement Price, 0.1 × (Strike Price – Settlement Price)) × abs(Position Size) × Contract Multiplier |
Margin parameters
| Underlying | Initial Margin Ratio 1 | Initial Margin Ratio 2 | Maintenance Margin Ratio |
|---|---|---|---|
| BTC_USDT | 0.1 | 0.15 | 0.075 |
| ETH_USDT | 0.1 | 0.15 | 0.075 |
| DOGE_USDT | 0.15 | 0.2 | 0.1 |
| LTC_USDT | 0.15 | 0.2 | 0.1 |
| SOL_USDT | 0.15 | 0.2 | 0.1 |
