Cross-Margin Risk

Cross-Margin Risk refers to the danger that a loss in one leveraged position can deplete the collateral available to other positions within the same account. In a cross-margin setup, all assets in the account act as a single pool of collateral for all open trades.

While this provides greater flexibility and prevents unnecessary liquidations on individual trades, it increases the risk of total account wipeout if a single position moves significantly against the trader. If the aggregate collateral value falls below the total maintenance margin for all positions, the entire account is at risk of liquidation.

This creates a cascading failure effect where a volatile move in one asset impacts the health of unrelated positions. Traders must carefully assess their total exposure and account-wide leverage to mitigate this systemic risk.

It requires a deep understanding of portfolio-wide correlation and volatility.