Portfolio Margin Explained: Reg T vs Risk-Based Margin, OCC TIMS, FINRA 4210(g), and CIRO

Portfolio margin is a risk-based way of setting the collateral a brokerage customer must hold against options and stock positions: instead of applying a fixed formula to each position, the broker revalues the whole portfolio under a set of hypothetical market moves and requires margin equal to the largest loss. In the United States it is governed by FINRA Rule 4210(g) and computed with theoretical values produced by the Options Clearing Corporation (OCC). For hedged or short-premium option portfolios it typically requires a fraction of what the traditional strategy-based rules require.

In short: strategy-based margin (what traders loosely call “Reg T margin”) charges each position or recognized spread a fixed percentage of the underlying. Portfolio margin shocks the portfolio from -8% to +6% for broad-based indexes and plus or minus 15% for single stocks, at ten points, and charges the worst loss. Lower margin means more leverage. It also means the account is only protected against the moves in that grid: a one-day drop like March 16, 2020 (-12.0% for the S&P 500) or October 19, 1987 (-20.5%) is outside it. In Canada, CIRO’s rules remain strategy-based for client accounts, with an optional exchange-model (SPAN) method for accounts holding only Montréal Exchange derivatives.

Retail approval levels and the account agreements that come before any of this are covered in options approval levels. This article explains how professionals’ margin works. It is not legal advice, and the rules described are as of the dates stated.

A common misconception: “portfolio margin means less risk”

Portfolio margin does not change the risk of a position. It changes how much capital the broker requires you to hold against it. A short index put needs about one-third as much margin under portfolio margin in our example below, so the same account can hold three times as many. If the market moves beyond the stress grid, the loss is three times as large relative to the account. The accounts that blow up under portfolio margin are usually the ones that used the extra capacity.

Strategy-based margin: the rules in FINRA 4210(f)

The Federal Reserve’s Regulation T sets the initial requirement for buying stock on margin (50%). For options, the minimums come from FINRA Rule 4210(f)(2) and matching exchange rules. For a short listed option in a customer account, the requirement is:

100% of the option’s current market value, plus a percentage of the underlying’s value: 20% for stock and narrow-based (industry) index options, 15% for broad-based index options,
reduced by any out-of-the-money amount,
but not less than the option’s value plus 10% of the underlying (for calls) or 10% of the aggregate exercise price (for puts).

Spreads get credit only if they fit a recognized pattern. For a spread as defined in the rule, the requirement on the short leg is the lesser of the naked requirement and the spread’s maximum potential loss, computed by netting intrinsic values at each strike price in the spread. Long options with nine months or less to expiry must be paid in full.

This is simple and predictable. It is also blind to how positions interact: an account that is short puts and long an offsetting stock index future, or long stock against short calls in a different series, gets little or no credit unless the combination matches a defined strategy.

Risk-based margin: FINRA Rule 4210(g)

How it came about

The SEC approved portfolio margining as a pilot on July 14, 2005, through amendments to NYSE Rule 431 (Release No. 34-52031) and CBOE’s margin rules (Release No. 34-52032), initially for broad-based index options and related products and with a minimum account equity of $5 million. In 2006 the SEC approved expansions to single-stock options, security futures and equities (for NYSE, Release No. 34-54125, July 11, 2006; for CBOE, Release No. 34-54919, December 12, 2006). The CBOE order eliminated the $5 million requirement for all portfolio margin accounts except those holding unlisted derivatives. The requirements now sit in FINRA Rule 4210(g).

What the rule says

From the current text of FINRA Rule 4210(g):

Eligible products: margin equity securities, listed options on equities and equity indexes, security futures, unlisted equity derivatives, warrants, and (for firms that are also futures commission merchants) related broad-based index futures and options on them.
Grouping: positions are grouped by underlying into portfolios (a “security class”). Gains and losses net fully within a portfolio at each valuation point. Offsets between portfolios in the same product group are allowed as permitted by SEC Rule 15c3-1a.
Valuation points: each portfolio is revalued at ten equidistant points across a range set by portfolio type:

Portfolio type	Market move range
High-capitalization, broad-based market index	+6% / -8%
Non-high-capitalization, broad-based market index	+/- 10%
Any other eligible product (single stocks, narrow-based indexes)	+/- 15%

Margin required: the greater of the largest theoretical loss at any valuation point, or $0.375 per contract times the multiplier ($37.50 per standard 100-share option). The account requirement is the sum of each portfolio’s greatest loss after offsets.
Who is eligible: broker-dealers, members of a national futures exchange (for index hedges), and any other customer approved for uncovered options. A customer holding unlisted derivatives must maintain at least $5 million of equity. Portfolio margin does not apply to IRAs.
Deficiencies: a customer has three business days to meet a portfolio margin deficiency, after which the broker may accept only risk-reducing orders and must liquidate enough positions to cure it. If the deficiency is not met by the close of the next business day, the broker must deduct it from its own net capital.
Broker risk controls: a written risk methodology filed with FINRA, stress testing, concentration monitoring, intraday monitoring (accounts under $5 million in equity must margin intraday risk similarly to end-of-day risk), and a cap on aggregate portfolio margin requirements of ten times the firm’s net capital.
Disclosure: before the first trade, the customer must receive and sign a special written disclosure statement about portfolio margining.

FINRA’s rule sets no general minimum account size for listed products. Brokers impose their own; the SEC and CFTC, in their joint 2020 release on security futures margin (Release No. 34-90244), described portfolio margin minimum equity requirements as “generally ranging from $100,000 to $500,000”. Those house minimums, and house add-ons to the requirement itself, vary by firm.

OCC and TIMS: where the theoretical values come from

Portfolio margin needs a pricing model to compute losses at each valuation point. The rule requires an SEC-approved model, and the SEC said in its 2006 NYSE order that “the only model that qualifies under Rule 15c3-1a is the OCC’s Theoretical Intermarket Margining System (TIMS)”.

The SEC’s order approving OCC’s own move to a new margin system (Release No. 34-53322, February 15, 2006) describes TIMS in detail. TIMS is a univariate methodology: it computes the gain or loss on positions at ten price points for equity instruments (twenty for non-equity instruments) across a range of likely moves in each underlying; it groups options, futures and stock positions on the same underlying into classes and classes into product groups; and it measures account risk as the sum of the worst outcome of each product group, recognizing offsets only within a product group. For its own clearing-member margin, OCC replaced TIMS with STANS (System for Theoretical Analysis and Numerical Simulations), a multivariate simulation approach, because summing worst cases across groups overstates risk for diversified portfolios and can imply impossible scenarios. The same order notes that OCC would continue to run TIMS to calculate theoretical gains and losses under Rule 15c3-1a. FINRA Rule 4210(g)(8)(B) then requires brokers to obtain and use theoretical values rendered by an approved pricing model when computing each customer’s gains and losses at the valuation points.

Worked example: index options under both regimes

Assumptions, stated so they can be changed:

A hypothetical S&P 500 at 6,000, SPX-style options with a 100 multiplier (contract notional $600,000), 30 days to expiry, 4% interest.
Implied volatilities with skew: 5,600 put 23.5%, 5,700 put 21%, 6,000 put 18%, 6,000 call 17%, 6,300 call 14%.
Ten contracts per position. Prices by Black-Scholes: 5,700 put 34.87, 5,600 put 28.21, 6,000 put 113.71, 6,000 call 126.57, 6,300 call 15.81.
Portfolio margin: revalue at -8%, -6.4%, -4.8%, -3.2%, -1.6%, +1.2%, +2.4%, +3.6%, +4.8%, +6% with implied volatility held constant. (OCC’s theoretical values and broker add-ons can produce higher numbers; holding volatility constant is a simplification.)

The strategy-based arithmetic for the short 5,700 put, per contract: premium 34.87 + 15% x 6,000 (900) - out-of-the-money amount 300 = 634.87 points, or $63,487. The minimum (34.87 + 10% of the 5,700 strike = 604.87) is lower, so $63,487 applies.

Position (10 contracts)	Strategy-based requirement	Portfolio margin (worst point)	Ratio
A. Short 5,700 puts (cash-secured would need $5.7 million)	$634,869	$195,372 (at -8%)	3.2x
B. Short 5,700 / long 5,600 put spread	$100,000	$41,589 (at -8%)	2.4x
C. Short 5,700 put / 6,300 call strangles	$650,676	$179,606 (at -8%)	3.6x
D. Short 6,000 straddles	$1,140,279	$233,604 (at -8%)	4.9x

For position C, the strategy-based rule charges the larger side’s requirement plus the other side’s premium: $634,869 + $15,810. For D, the call side is larger: $1,026,570 + the put premium of $113,710.

Here is the full grid for position A, the theoretical P&L at each valuation point:

Move	-8%	-6.4%	-4.8%	-3.2%	-1.6%	+1.2%	+2.4%	+3.6%	+4.8%	+6%
P&L ($)	-195,372	-135,919	-87,128	-48,887	-20,319	+10,837	+18,697	+24,243	+28,051	+30,596

The worst point is -8%, so the requirement is $195,372. The premium collected was $34,869.

Two features stand out. Portfolio margin gives the biggest relief to positions that the strategy-based rules overcharge relative to their risk within the grid, such as short straddles (position D), because the 15%-of-underlying charge does not depend on how far a move would actually cost. And for defined-risk spreads (position B, a bull put spread as described in vertical spreads explained), portfolio margin can be below the maximum possible loss: the spread can lose up to $100,000 less the $6,657 credit, but the -8% point costs only $41,589.

The per-contract minimum

The $0.375 per contract floor binds for positions whose stress losses are tiny, such as well-hedged spreads or far out-of-the-money long options. At $37.50 per contract, a 100-lot two-leg spread carries at least 200 x $37.50 = $7,500. Cboe’s “Margin Requirement Examples for Sample Options-based Positions” (using closing data from January 19, 2021) shows exactly this: several 100-lot, two-leg SPX and AAPL positions whose portfolio margin requirement is the $7,500 floor. The same Cboe document notes the stress assumptions behind its comparisons: a 20% move for strategy-based equity options against 15% under portfolio margin, and 15% for broad-based index options against -8% / +6%.

Outside the grid

The grid stops at -8%. The same positions under larger one-day moves (implied volatility unchanged, and with all implied volatilities raised 15 points to reflect a crash):

Position	Loss at -12%	Loss at -12%, IV +15 points	Loss at -20%
A. Short puts	$384,291	$445,803	$846,662
B. Put spread	$68,803	$54,577	$91,731
D. Short straddles	$461,246	$504,104	$940,028

From Cboe’s S&P 500 history, the index fell 12.0% on March 16, 2020 (2,710.95 to 2,386.13) and 20.5% on October 19, 1987 (282.70 to 224.84). An account holding position A on $250,000 of equity, comfortably above its $195,372 requirement, would have lost about 1.5 times its equity on a day like March 16, 2020. Brokers know this, which is why the rule requires them to stress test beyond the grid and why many add house requirements for concentrated or short-volatility books.

Worked example: a single stock

Hypothetical Maple Widgets Inc. at $50, 10 short 30-day puts at the $45 strike, implied volatility 35%. The put is worth $0.337.

Regime	Rule applied	Requirement per contract	10 contracts
US strategy-based (FINRA 4210(f))	0.337 + 20% x 50 - 5.00 OTM, min 0.337 + 10% x 45	$533.70	$5,337
US portfolio margin (4210(g), +/- 15%)	worst loss at -15% (stock $42.50)	$283.25	$2,833
Canada, CIRO client account (if eligible for the 30% reduced rate)	30% x 50 - 5.00 OTM, min 5% of exercise value	$1,000.00	$10,000

The Canadian number is higher because CIRO ties the short option charge to the stock’s own margin rate, discussed next.

Canada: CIRO’s rules as of 2026

In Canada, investment dealers are regulated by the Canadian Investment Regulatory Organization (CIRO). Client margin for options is set in Rule 5700 of CIRO’s Investment Dealer and Partially Consolidated Rules (IDPC Rules). As of the August 11, 2026 consolidation of those rules:

Short options (section 5721): the minimum client margin is a percentage of the underlying’s market value, minus any out-of-the-money amount. For equity options the percentage is the underlying stock’s own margin rate; for index options and index participation units (ETFs), CIRO’s published floating margin rate for that index or unit.
Floors (section 5721(2)): the minimum client margin cannot be less than 5% of the underlying value (calls) or aggregate exercise value (puts) for equity options, 2% for index and index participation unit options, 1% for debt options and 0.75% for currency options.
Stock margin rates (section 5310): 30% for client positions in stocks priced at $2.00 or more that qualify for CIRO’s List of Securities Eligible for Reduced Margin, 50% for other stocks at $2.00 or more, rising to 100% below $1.50.
Offsets: Rule 5700 lists recognized strategies (spreads, straddles, butterflies, condors, box spreads, conversions, stock and option combinations, futures and option combinations) that receive reduced margin. For client offsets involving a short and a long option, the short option must expire on or before the long one.
The portfolio-style exception (section 5776): for client accounts subject to the domestic gross customer margin model and holding only derivatives listed on the Bourse de Montréal, a dealer may use the Standard Portfolio Analysis (SPAN) methodology with the margin intervals and assumptions of the Canadian Derivatives Clearing Corporation (CDCC). CIRO may restrict its use.

We did not find a general, US-style risk-based portfolio margin regime for client accounts in the August 11, 2026 IDPC Rules. A Canadian resident trading US-listed options through a Canadian dealer is therefore generally margined under CIRO’s strategy-based rules, though dealers’ house practices and any later rule changes should be checked directly. Canadian approval and suitability rules are summarized in options approval levels.

What can go wrong

Leverage creep. The extra buying power is the risk. Positions sized to portfolio margin can lose more than the account in a move outside the grid, as the March 2020 example shows.
Requirements change overnight. Theoretical values are refreshed as prices and implied volatilities change. A volatility spike can raise requirements sharply the next morning even if the positions have not moved against you.
House add-ons and concentration charges. Brokers can and do require more than the rule minimum, especially for concentrated single-stock positions or large short-volatility books, and they can change those add-ons without much notice.
Forced liquidation. After three business days a deficiency must be cured by liquidation, and brokers can act sooner under their agreements. Liquidation happens in stressed markets with wide spreads.
Offsets can fail. A hedge that offsets inside the model (for example, an index position against single stocks) can come apart in a real crash when correlations change. The SEC’s 2006 OCC order lists exactly this kind of mismatch as a limitation of TIMS.
Short volatility looks cheapest. Under portfolio margin, short premium positions often get the largest reductions. Those are the positions with the most sudden losses, as described in options risks explained honestly.

The short version

Strategy-based margin (FINRA Rule 4210(f), Regulation T for stock) charges each short option a fixed percentage of the underlying, 15% for broad-based indexes and 20% for stocks, with credit only for recognized spreads. Portfolio margin under FINRA Rule 4210(g) revalues the whole portfolio at ten points from -8% to +6% for broad-based indexes and plus or minus 15% for stocks, using OCC’s TIMS-based theoretical values, and charges the worst loss, with a $37.50 per contract minimum. In our examples it cut requirements by 2.4 to 4.9 times. That capacity is leverage: moves outside the grid, such as the S&P 500’s 12% fall on March 16, 2020, can cost more than an account holding the minimum. In Canada, as of the August 11, 2026 IDPC Rules, CIRO margins client options with strategy-based rules tied to each stock’s margin rate, plus an optional SPAN method for accounts holding only Montréal Exchange derivatives.

This article explains how margin rules work as of November 2026. It is not legal or investment advice; check your broker’s current requirements and agreements.