Portfolio Margin on Kyan (Premia V4)

Portfolio margin is one of Kyan’s (Premia V4) largest upcoming features. Minimize collateral and maximize capital efficiency.

Margin allows traders to leverage their capital more effectively by enabling them to control larger positions in the market with a smaller upfront investment. Portfolio margin takes this concept a step further, offering greater flexibility when managing multiple positions under the same sub-account.

What exactly is portfolio margin, and what does it mean for decentralized derivatives trading on Kyan? Let’s get into it!

We’re hosting a Community Call to discuss Kyan’s portfolio margin and risk engine in deeper detail. Tune in on the Premia X account next Wednesday (Jan 22nd).

What is Portfolio Margin?

Margin refers to the collateral that traders must maintain in their accounts to cover potential losses on open positions. In traditional options trading, there are typically two types of margin systems: isolated margin and portfolio margin.

With isolated margin, the margin requirements are calculated for each position individually. This system is simple but can be capital-intensive.

Note: Isolated margin is prioritized on the development roadmap post-launch.

Portfolio margin is a dynamic system used to compute the margin requirements for eligible positions by taking into account the entire portfolio instead of calculating the risk for each position separately. This approach is more capital-efficient, flexible, and allows traders to optimize their positions.

Benefits of Portfolio Margin

In options trading, portfolio margin can significantly improve a trader’s ability to manage risk and capital; here’s how it works.

Capital Efficiency

Kyan isolates risk under separate sub-accounts, each denominated by an asset like BTC.

Portfolio margin takes into account the net risk of all positions under the same sub-account, meaning traders are not required to over-collateralize every individual trade.

For example, imagine a trader holds the following positions:

• Long BTC Call Option at $30,000 strike price.

• Short BTC Put Option at $28,000 strike price.

Under an isolated margin system, the trader might need to allocate $2,000 for each position, totaling $4,000 in margin. However, since these positions offset each other (one benefits if BTC rises, the other if BTC falls), a portfolio margin system may reduce the requirement to just $1,500.

Greater Leverage

By optimizing the use of collateral, portfolio margin allows traders to allocate more capital to larger or additional positions.

Dynamic Risk Management

Portfolio margin systems continuously assess the risk of all open positions. This dynamic approach ensures that margin requirements adjust as market conditions change, giving traders the ability to stay nimble in volatile markets.

Hedging Flexibility

With portfolio margin, traders can easily execute hedging strategies, such as combining options and perpetual contracts (perps), without being penalized by high margin requirements. This flexibility is crucial for managing directional risk across diverse portfolios.

Increased Liquidity

Portfolio margin allows underwriters to allocate their capital more efficiently and as a result, offer more bids and asks across the volatility surface. This greatly increases overall liquidity on Kyan and makes it easier for traders to find makers for their orders.

Enhanced Trading Experience

Managing trades, individual positions, and the overall portfolio becomes far more dynamic, enabling both programmatic and manual traders to respond to market movements with greater speed and precision. This kind of efficiency and functionality has previously only been attributed to CEXs.

Why Portfolio Margin is the Future of Options

As crypto markets mature, traders are demanding more efficient tools to manage their capital and risk. Portfolio margin is a cornerstone of professional-grade trading platforms due to its ability to:

• Lower trading costs.

• Provide greater capital efficiency and flexibility.

• Support complex strategies, such as spreads and hedges.

• Help traders navigate volatile markets with confidence.

Kyan (Premia V4) is at the forefront of this shift, integrating portfolio margin to empower traders while maintaining a robust risk engine.

Final Thoughts

Portfolio margin is more than just a tool for reducing collateral requirements—it’s a game-changer for options traders. By considering the net risk of a portfolio, it unlocks new opportunities for leverage, strategy execution, underwriting, and capital efficiency.

Questions about Kyan (Premia V4)?

Stay tuned for more articles about Kyan!

If you have any questions, hop into our Discord or shoot us a message on X. We would love to know your thoughts!

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