Delta Margin
The Delta margin is calculated as follows:
- The Delta of an option is equivalent to the position’s underlying Forex spot exposure. Hence, a 40 Delta EUR/USD Call option for EUR 1,000,000 has a Forex exposure of EUR 400,000 (the delta of an FX spot position is 100).
- The Delta exposure is calculated for every single currency pair.
- The Delta exposures in single currencies are netted, meaning that if you are long in EUR/USD and short in EUR/JPY, given identical notional amounts in each position, your exposure would be calculated on USD/JPY since your EUR positions basically cancel each other out.
- The net Delta exposures in single currencies are calculated into the account currency. Thus if your account currency is euro, all of your exposures, regardless of the currency pairs involved, are calculated in euro.
- The net Delta exposures in the account currency are sorted by “long” or “short”.
- The net Delta exposure is multiplied by the current applicable spot margin requirement factor.
- If the option does not cause the client's margin requirement to exceed $25,000, the option's Delta margin will only be half of what is mentioned below.
Example
If you purchase a 25 Delta EUR/USD option for 1,000,000, you will have an exposure in the spot of EUR 250,000. If you have a spot margin requirement of 2%, your Delta margin will amount to 2%*250,000 EUR = EUR 5,000 as shown in the table below.
| Delta of the option | |||
|---|---|---|---|
| Spot Margin | 75D |
50D |
25D |
| 2% | 15000 | 10000 | 5000 |
| 4% | 30000 | 20000 | 10000 |
| Delta margin for an option with a notional amount of 1 million. | |||
As explained in the previous section, the Delta margin forms one part of your overall Forex Options margin requirement. The second part is the Vega margin, which is explained in the next section.