Calculation of the Delta Margin
The Delta of a Forex Option position describes how the value of the Forex Option changes as a result of changes in the underlying Forex spot rate.
The Delta of a Forex Option position multiplied by the notional amount gives the underlying spot exposure of the position (i.e., DELTA EXPOSURE = NOTIONAL AMOUNT * DELTA). The spot exposure represents the size of the spot position required to hedge the Forex Option.
The calculation for the Delta Margin requirement of a Forex Option position is:
DELTA MARGIN = DELTA EXPOSURE * FOREX SPOT MARGIN REQUIREMENT
When calculating the Delta Margin requirement for a new Forex Option position, all of the portfolio’s current spot exposures – both open Forex spot positions and Forex Option spot exposures – are considered. See the sample calculation for an example of this.