A 31% weekly range and a -12.13% day force a margin rethink for leveraged ETH clients
Should the exchange risk team raise ETH margin requirements for leveraged clients this week, or keep current levels and rely on intraday liquidation to absorb a repeat of Thursday's -12.13% day?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 24 June 2019, ETH fell 5.1%, from 308.42 to 292.70, inside a 31.0% range. It gained 6.63% on Wednesday 26 June, then dropped 12.13% on Thursday 27 June, closing in the lower third of the week range. Realised annualised volatility reached 110.6%, dollar volume was 1.83 times the prior 12-week average, and ETH lost 4.62 percentage points against BTC. An exchange risk team sets margin requirements for leveraged ETH clients and reviews them when volatility shifts.
Judgment
The weekly return is modest, but the path is not: a 31.0% range and a -12.13% day mean an overnight leveraged position can be liquidated well past its trigger. Raise the required margin for ETH relative to BTC, set from the worst daily and hourly moves of this week rather than the 5.1% weekly return, and keep the higher level for new positions while existing ones are grandfathered. Accept the cost of smaller positions.
What would change it
If the team's own liquidation records show Thursday's client positions were closed near the trigger price with little slippage, the higher margin can be reduced. If ETH's daily moves stay near this week's for several weeks, the increase should be made permanent.
What sets this case apart
A small weekly loss with a huge range tests margin sizing; the trigger, not the weekly return, sets the required cushion.