Lesson

Portfolio Margin Foundations | Options Educator

Understand how correlated positions, stress tests, and buying-power requirements shape portfolio margin.

In this lesson

The stress grid

  • The requirement is about the worst loss on the broker's stress grid, not a charge per position.
  • A defined-risk position puts a ceiling on its own stressed loss.
  • An uncovered position keeps losing further down the grid.

Correlation

  • Losses that arrive in the same scenario add up.
  • Only exposures that point in opposite directions offset.
  • Several small, similar positions can carry one large requirement.

The buffer

  • Buying power = equity − requirement, at today's prices.
  • A shock raises the requirement and lowers equity together.
  • Leave part of the buying power unused: that part is the buffer.

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