Options accounts & routing
What is Portfolio Margin and how does it calculate account risk using a multi-factor stress-testing model?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Portfolio Margin calculates margin requirements by stress-testing an entire account against a range of hypothetical underlying price and volatility scenarios, typically plus/minus 15% for equities, charging margin based on the worst-case theoretical loss.
How it works
This risk-based approach, approved by the SEC and detailed in FINRA Rule 4210, can significantly reduce margin requirements for hedged or diversified options portfolios compared to strategy-based Reg T margin.
An example
A well-hedged collar position might require far less portfolio margin than the sum of its individual Reg T margin requirements because offsetting risks reduce worst-case stress loss.
Risk & limitations
Portfolio margin can also increase requirements dramatically for concentrated or correlated risk positions during high-volatility stress scenarios compared to standard margin.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.