Margin

Margin ensures that every option trade on ClickOptions is fully secured and that payout obligations can always be honored. The system distinguishes between two types of margin:

• User Margin – applies to traders who buy options

• Vault Margin (Underwriter Margin) –applies to ClickVault participants who underwrite option risk.

User Margin

Simple and Limited

• Option buyers only pay the premium upfront.

• There are no margin calls.

• Maximum risk = the premium paid.

This makes options buying safer and simpler than leveraged futures or perpetuals.

Vault Margin (Underwriter Margin)

The Vault is the central margin pool that underwrites all written options. It contains:

• Collateral pledged by community contributors, market makers, and ClickOptions

• Collected premiums from all open option trades

• Unrealized PnL from open positions

Reserves and treasury buffers are kept outside VaultCapital. They act as additional protection layers (see Risk Assurance).

Portfolio-Based Margin

Unlike traditional exchanges where each short option requires separate maintenance margin, ClickOptions uses a portfolio model:

• Offsetting Risk → Profits from calls offset premiums from puts

• Delta-Based Controls → Margin scales with net portfolio exposure, not per trade

• Capital Efficiency → Recognizes natural hedges across expiries/strikes, requiring less locked collateral

Step 1 – Delta Contribution per Option

$$\Delta_{portfolio} = \sum \left( \Delta_{call} \times Size_{call} \right) + \sum \left( \Delta_{put} \times Size_{put} \right)$$

$$\Delta_{call}: 0 \;\to\; 1$$

$$\Delta_{put}: -1 \;\to\; 0$$

Step 2 – Net Exposure

$$Exposure_{net} = \Delta_{portfolio} \times SpotPrice$$

Step 3 – Non-linear Adjustment

Calls and puts do not perfectly hedge each other, especially when far ITM/OTM or during volatility spikes.

$$Exposure_{adjusted} = Exposure_{net} + \kappa \times Vega_{portfolio}$$

Where:

$$\kappa = \text{stress multiplier (volatility regime)}$$

$$Vega = \text{sensitivity to volatility}$$

Coverage-Based Controls (Vault Utilization)

Instead of individual margin requirements per trade, ClickOptions uses coverage ratios based on Vault Capital vs. Adjusted Net Exposure:

$$CoverageRatio = \frac{VaultCapital - \left| Exposure_{adjusted} \right|}{\left| Exposure_{adjusted} \right|}$$

• If

$$CoverageRatio < 0.5$$

→ ASK side disabled for the exposed leg

$$\Delta_{portfolio} < 0 \; : \; \text{Calls disabled (ASK)}$$

$$\Delta_{portfolio} > 0 \; : \; \text{Puts disabled (ASK)}$$

• If

$$CoverageRatio < 0.1$$

→ ASK and BID disabled for the exposed leg (trading halted on that side).

Example

• VaultCapital = 1,000,000 USDT

• Adjusted Net Exposure = 800,000 USDT

$$CoverageRatio = \frac{1{,}000{,}000 - 800{,}000}{800{,}000} = 0.25$$

→ Coverage < 0.5 → ASK side disabled.

Market Maker Hedging via External Venues

Professional market makers may hedge exposure on external venues. ClickOptions integrates these positions into the Vault risk engine via read-only API keys.

• Futures / Perpetuals: reduce exposure directly by notional amount.

• Options: reduce exposure only through delta contribution.

NOP calculation with external hedges:

$$Exposure_{adjusted}^{hedged} = \left( \Delta_{portfolio} + \Delta_{options}^{external} \right) \times IndexPrice - FuturesNotional^{external} + \kappa \times Vega_{portfolio}$$

Connectivity is continuously monitored. If API data is delayed or unavailable, the system automatically reverts to internal-only exposure (hedges excluded).

Important

• External hedges reduce Vault exposure but their PnL is not included in VaultCapital (belongs to the MM).

• Only if ClickOptions executes hedges directly would hedge PnL be reflected in VaultCapital.

PnL Coverage Gate

If running losses on Vault positions exceed Vault Capital, exposed side quotes (BID/ASK) are halted entirely.

$$\left| PnL_{unrealized}^{loss} \right| \geq VaultCapital \;\;\Rightarrow\;\; \text{Halt exposed side quotes}$$

This ensures outstanding contracts remain solvent until expiry.