Cross vs isolated margin: collateral and liquidation

The question is which collateral is shared

Isolated margin allocates collateral to a particular position. Cross margin uses eligible collateral within a defined account or margin pool. The boundaries depend on the venue, account configuration and collateral rules: cross does not automatically mean every asset in every wallet. Neither mode changes the underlying market exposure merely by changing its name.

Initial margin is not the loss limit

Initial margin is the collateral required to open exposure. Maintenance margin is the requirement for keeping it open. In a simplified linear contract, initial margin is notional divided by leverage. Actual requirements may include closing fees, risk tiers and collateral haircuts. A liquidation price is not the same as the price at which every dollar of initial margin has disappeared.

Two positions in a shared pool

Hypothetical account: $1,000 eligible equity supports two positions. A $200 unrealized loss on one reduces the pool to $800 before other changes. The second position may face greater margin pressure even if its own price is unchanged. Do not subtract initial margin a second time when calculating equity: reserved margin and realized losses are different quantities.

An isolated example

A $2,000 notional position with $200 allocated initial margin has a simplified leverage ratio of 10. A 3% adverse price change produces about $60 gross loss on a linear contract, not $6. The remaining isolated equity is about $140 before costs. Whether liquidation occurs depends on the actual maintenance requirement and reference price, not this arithmetic alone.

Changing settings changes assumptions

Adding margin can change a liquidation estimate but also increases the collateral exposed. Automatic margin replenishment can draw from an available balance. Switching modes may be restricted while orders or positions exist. Read the current account rules rather than treating a calculator or a screenshot from another account type as the final requirement.

A margin review that can be reproduced

Record the contract, quantity, settlement asset, collateral pool, mark price, maintenance tier, fees and other open exposures. Separate a position-level estimate from an account-level risk ratio. Repeat the calculation after changing one input at a time; changing price, quantity and collateral together makes it difficult to identify the cause of a different result.

What the TradingHub calculator can establish

Use the margin calculator for a simplified collateral calculation and the liquidation calculator for its stated isolated-margin estimate. They cannot see your exchange balances, portfolio offsets, haircuts or pending orders. Verify the venue position screen separately. A stop trigger, liquidation reference and actual execution price can differ, so the space between them is not a guaranteed protection.

Practice and interpretation

In the scenario below, calculate initial margin before comparing an adverse move. Keep notional constant when changing leverage: required initial collateral changes, while gross PnL for the same linear quantity and price move does not. This exercise illustrates accounting relationships; it does not identify a suitable margin mode, leverage or position for any person.