What is Portfolio Margin?
Portfolio Margin (PM) is a sophisticated margin calculation system used by brokerage firms and exchanges. Unlike the traditional "Reg-T" or "Strategy-Based" margin, which evaluates the risk of each position individually, Portfolio Margin assesses the overall risk of your entire portfolio in a consolidated way.
It does this by using complex risk models (like SPAN or Monte Carlo simulations) to calculate a "worst-case scenario" loss for your portfolio across a range of possible market movements (e.g., up/down 8-15%). The margin requirement is then based on this simulated maximum loss, rather than fixed percentages per trade.
Key Features & Benefits:
· Capital Efficiency: It often results in significantly lower margin requirements for diversified or hedged portfolios because offsetting risks (e.g., holding a long call and a short call on the same underlying asset) are recognized.
· Holistic View: Treats your account as one unified portfolio.
· Higher Leverage (and Higher Risk): While it can free up capital, it also allows for greater leverage, which magnifies both potential gains and losses. It's typically for advanced traders.
· Requirement: Usually requires high account minimums (e.g., $100,000+ in the US) and approval based on trading experience.
How Portfolio Margin Works on Binance?
On Binance, this feature is known as "Portfolio Margin Mode" or "Unified Margin" (especially for derivatives). It's a core feature of Binance's advanced trading ecosystem.
1. Unified Collateral: Your entire portfolio across certain wallets (like USDⓈ-M Futures, COIN-M Futures, and Margin wallet) can be combined into one Shared Collateral Pool. A single asset (like USDT) can serve as collateral for all positions.
2. Cross-Margin by Default: The system automatically uses your shared collateral to meet the margin requirements for all positions, maximizing capital efficiency.
3. Risk-Based Calculation: Binance's system continuously calculates the total risk of your portfolio, considering correlations and offsets between different positions (e.g., a spot BTC holding might offset some risk of a BTC futures position).
4. Margin Call & Liquidation: Your Maintenance Margin requirement is based on the overall portfolio risk. If your combined equity falls below the total maintenance margin, you may face a margin call or automatic liquidation of positions to bring the account back to a safe level.
Important Note:
Binance's Portfolio Margin is a powerful tool for professional traders but comes with increased complexity and risk, including the risk of liquidation across your entire portfolio. Always understand the mechanics fully before enabling it.
