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Options Metrics Guide

Learn how Rails calculates option premium, payoff, and margin.

This guide explains the main options metrics on Rails and how they are calculated. Explore them below:

See Black-76 & the Greeks for pricing inputs and Margin & Liquidation for liquidation mechanics.

Definitions

Symbol
Meaning

FF

Forward price: the underlying reference price used to value the option. On Rails, F=PindexF = P_{index}

KK

Strike price: the price at which the option settles at expiry.

PP

Price, where:

  • PindexP_{index} is the Index Price, or current fair-market price of the underlying asset. It is used in margin calculations.

  • PcallP_{call} is the call model price from Black-76, before the intrinsic floor.

  • PputP_{put} is the put model price from Black-76, before the intrinsic floor.

  • PmarkP_{mark} is the Mark Price.

QQ

Contracts: the number of option contracts in the position.

SS

Side: direction of the position, where:

  • Long = 1

  • Short = -1

TT

Time to expiry: the remaining life of the option, expressed in years.

pp

Premium: the per-contract amount paid by the buyer or received by the seller.

  • ppaidp_{paid} is the Premium Paid.

  • prcvdp_{rcvd} is the Premium Received.

MM

Margin, where:

  • IMIM is Initial Margin, or collateral required to open or maintain a short option position.

  • MMMM is Maintenance Margin, or the minimum collateral required to avoid liquidation on a short option position.

  • MusedM_{used} is Used Margin, or collateral locked to cover open orders and positions.

DD

Deposits: Amount of USDT deposited into your account. Note: Transferring cash balances from Perps to Options Account are considered a deposit.

WW

Withdrawals: Total USDT withdrawal volume. Note: Transferring cash balances from Options to Perps are considered a withdrawal.

P&LP\&L

Profit & Loss: the USDT profit or loss relative to entry and position size, where:

  • P&LuP\&L_u​ = Unrealized P&L

  • P&LrP\&L_r​​ = Realized P&L

FeeFee

Fees: Total fees charged in USDT, where:

  • FeedelFee_{del} is the Delivery Fee (only at expiry)

  • FeetxnFee_{txn} is the Transaction Fee (except at expiry)

POPO

Payoff: the USDT amount settled at expiry, equal to the option's intrinsic value if in-the-money and zero otherwise. The seller pays the payoff to the buyer at settlement.

Calculations

General

Total Balance

Total Balance is the settled cash value of your account. It reflects completed events, but does not include unrealized P&L from open positions:

Total Balance=Dtotal+ptotal+POWtotalFeestotal\text{Total Balance} = D_{total} + p_{total} + PO -W_{total} -Fees_{total}

Available Balance

Available Balance: funds available for new trades or withdrawals.

Available Balance=Total BalanceMused\text{Available Balance} = \text{Total Balance} - M_{used}

Account Balance

Your Account Balance is your total cash (collateral), and is equivalent to your Total Balance when you have no positions open.

Account Balance=Available Balance+Mused\text {Account Balance} = \text{Available Balance} + M_{used}

Account Equity

Account Equity is the real-time value of the account, combining settled cash with the current mark-to-market value of all open positions:

Account Equity=Total Balance+i(Pmark,i×(Qi×Si)\text{Account Equity} = \text{Total Balance} + \sum_{i} \left( P_{mark,i} \times (Q_i \times S_{i} \right)

where:

  • i(Pmark,i×Qi)\sum_{i} \left( P_{mark,i} \times Q_i \right) is the combined mark-to-market value of all open positions, using each position's Mark Price (Pmark,iP_{mark,i}) and quantity

For short positions, the position mark value is negative, so Account Equity can be above or below Total Balance depending on how open positions are marked.

Margin

Margin Ratio

Margin Ratio measures how close a short position account is to liquidation. It is the account's total maintenance requirement relative to its equity.

Margin Ratio=MMtotalAccount Equity\text{Margin Ratio} = \frac{MM_{total}}{\text{Account Equity}}

where:

  • MMtotal=iMMiMM_{total} = \sum_{i} MM_i

  • Account Equity=Total Balance+Positions Mark Value\text{Account Equity} = \text{Total Balance} + \text{Positions Mark Value}

A higher Margin Ratio indicates greater liquidation risk; liquidation is triggered when the ratio reaches 100%.

Margin (Long Call/Put)

For long calls or puts, the maximum loss is the premium paid for the contract and adds a buffer rate of 16.5%, therefore: Required initial margin is calculated: IM=(p×1.165)×QIM = (p \times 1.165) \times Q

Once the premium is paid upon fills, the maintenance margin required becomes: MM=(p×0.165)×QMM = (p \times 0.165) \times Q

The 16.5% buffer rate covers a 12.5% liquidation fee, 1% insurance fee, and 3% slippage.

Initial Margin (Short Call/Put)

For short calls or short puts, potential losses can be large. Short calls have no upside loss ceiling, and short puts can still lose significantly if the underlying falls to zero. Therefore, margin is the greater of IMIM' and Maintenance Margin:

M=max(IM, MM)M = \max(IM',\ MM)

Where:

IM=[max ⁣(0.15×PindexOTM Discount, 0.10×Pmark)+Pmark]×QIM' = \left[\max\!\left(0.15 \times P_{index} - \text{OTM Discount},\ 0.10 \times P_{mark}\right) + P_{mark}\right] \times Q

This uses 15% index-based risk, with a 10% mark-price floor, plus mark price. It also ensures Initial Margin never falls below Maintenance Margin.

Maintenance Margin (Short Call/Put)

In Short Calls or Short Puts, Maintenance Margin is used for liquidation monitoring:

MM=max ⁣(0.05×PindexOTM Discount, 0.05×Pmark)×QMM = \max\!\left(0.05 \times P_{index} - \text{OTM Discount},\ 0.05 \times P_{mark}\right) \times Q

This uses 5% index-based risk, or 5% mark-price floor.

Mark Price Floor (Calls & Puts)

Rails prices options using Black-76 and applies an intrinsic value floor to prevent a mark price below intrinsic value.

For calls: Pmark=max ⁣(Pcall, max(FK,0))P_{mark} = \max\!\left(P_{call},\ \max(F - K,0)\right)

For puts: Pmark=max ⁣(Pput, max(KF,0))P_{mark}= \max\!\left(P_{put},\ \max(K - F,0)\right)

OTM Discount (Short Calls/Puts)

For short calls, the OTM discount reduces short-call margin when the call is out of the money:

  • OTM Discount=max(0, KPindex)\text{OTM Discount} = \max(0,\ K - P_{index})

For short puts, the OTM discount reduces short-put margin when the put is out of the money:

  • OTM Discount=max(0, PindexK)\text{OTM Discount} = \max(0,\ P_{index} - K)

Position Mark Value

Positions Mark Value is the mark-to-market value of all open positions:

Positions Mark Value=i(Pmark,i×Qi)\text{Positions Mark Value} = \sum_{i} \left( P_{mark,i} \times Q_i \right)

Pricing, Fees & Settlement

Premium

Option premiums are calculated using the Black-76 formula. Given the complexity, the formula and details are explained in our article on Black-76 and the Greeks.

Intrinsic Value

Intrinsic value is the option's immediate exercise value — what it would be worth if exercised right now.

For calls: Intrinsic Value=max(FK, 0)\text{Intrinsic Value} = \max(F - K,\ 0)

For puts: Intrinsic Value=max(KF, 0)\text{Intrinsic Value}= \max(K - F,\ 0)

Payoff

At settlement, if the contract is ITM, the contract seller pays the intrinsic value to the buyer, else the contract expires worthless.

For calls: PO=Q×max(FK, 0)PO = Q \times \max(F - K,\ 0)

For puts: PO=Q×max(KF, 0)PO = Q \times \max(K - F,\ 0)

Transaction Fee

The transaction fee applied to each options trade (other than at expiry) is calculated as:

Feetxn=min(0.0003×Pindex,0.125×p)×QFee_{txn} = min(0.0003 × P_{index}, 0.125 × p) × Q

The 12.5% cap on the option price prevents the fee from ever exceeding a fair proportion of the premium. Deep out-of-the-money contracts can have a premium close to zero, so charging on the index price alone would be disproportionate; the MIN function ensures the fee stays reasonable relative to the premium.

Delivery Fee

Options that are held through to expiry are settled with a delivery fee, calculated as:

Feedel=(0.00015×Pindex)×QFee_{del} = (0.00015 × P_{index}) × Q

Settlement P&L

These formulas show payoff at expiry, before fees:

  • Long call: P&L=max(FK,0)ppaidP\&L = \max(F - K,0) - p_{paid}

  • Long put: P&L=max(KF,0)ppaidP\&L = \max(K - F,0) - p_{paid}

  • Short call: P&L=prcvdmax(FK,0)P\&L = p_{rcvd} - \max(F - K,0)

  • Short put: P&L=prcvdmax(KF,0)P\&L = p_{rcvd} - \max(K - F,0)

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