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Strategy Accounts
Strategy Accounts are designed to help users unlock the power of options and employ more sophisticated trading strategies that allow for risk minimisation and collateral efficiency.
While Zeta's current Margin Accounts require you to provide margin on each contract in isolation, the Strategy Accounts calculate the maximum loss for a combination of options and only require this capital to be locked. Strategy accounts are fully collateralised Zeta accounts that can hold any combination of positions with the exception of naked short calls. Since they are fully collateralised, they cannot be liquidated.
  • A strategy account costs ~0.017 SOL and can be closed if there are no positions remaining.

Movements

Users will be required to execute a position movement to transfer positions between strategy and margin accounts. A position can only be moved into the strategy account once held by the user's margin account.
Movement Type
Direction
LOCK
Margin account -> Strategy account
UNLOCK
Strategy account -> Margin account
Upon position movement, the strategy account will hold the maximum loss of the portfolio in its balance.
  • Any required collateral will be transferred from the margin account balance.
  • Any excess strategy account balance will be transferred back to the margin account.
  • Users can move up to 10 positions per transaction, in one direction.
Validation checks on movement
  1. 1.
    The user has enough collateral to fund the strategy account.
  2. 2.
    The user has sufficient collateral in the margin account to fulfil maintenance margin requirements.
  3. 3.
    The user holds no naked short call or naked short future positions in the strategy account. (A naked short call position in this context is a short future or call that isn't able to be paired with another long call or long future.)
Positions locked into the strategy account will no longer charge margin on the Zeta margin account.
Unlocking positions from the strategy account will subject those positions to the margin obligations of the Zeta margining system. Read more here.

Collateral requirements

The amount of collateral required to be held in a strategy account is the maximum loss of the portfolio plus portfolio net cost of trades. Portfolios are treated on a per expiry basis and are independent of each other.
PortfolioNetCostOfTrades=CashReceivedShortCashPaidLongPortfolioNetCostOfTrades=CashReceivedShort−CashPaidLong
CollateralRequired=max(0,PortfolioMaxLoss+PortfolioNetCostOfTrades).CollateralRequired=max(0,PortfolioMaxLoss+PortfolioNetCostOfTrades).
  • There is no rebate provided on excess credits from portfolio net cost of trades. This will be realised on settlement or in margin account unrealised PNL upon unlock.
Position
Maximum loss of position
Long future
0
Long call
0
Long put
0
Short future
Infinite
Short call
Infinite
Short put
Strike of put
  • Note that the maximum loss of a position doesn't take into account the cost of trades. Therefore a long call position has a maximum loss of 0 as you have already paid the premium to hold the position.
Futures are treated as a 0 strike call. Due to the unbounded maximum loss of short calls (short futures and calls), strategy accounts do not allow a portfolio to hold a naked short call.
The max loss of a covered short call is:
max(0,LongCallStrikeShortCallStrike)max(0, LongCall Strike - Short Call Strike)
  • Given a complex portfolio, the zeta smart contract will optimise the pairing of short calls with long calls/futures to correctly calculate its max loss.

Examples

  • $SOL is at $100.
Example A:
  1. 1.
    User purchases 10 contracts of the 90 SOL call for $10 each. ($100)
  2. 2.
    User sells 10 contracts of the 150 SOL call for $2 each. ($20)
  3. 3.
    The user locks these positions into the strategy account.
    • The maximum loss of this portfolio is $0.
      • max($0, $90 - $150) * 10 = $0.
    • The portfolio net cost of trades is $80. ($100 - $20)
    • The collateral required is max($0, $0 + $80) = $80.
    • $80 is transferred from the user's margin account to the strategy account.
Example B:
  • User purchases 10 contracts of the 130 SOL call for $2 each. ($20)
  • User sells 10 contracts of the 70 SOL call for $30 each. ($300)
  • The user locks these positions into the strategy account.
    • The maximum loss of this portfolio is $600.
      • max($0, $130 - $70) * 10 = $600.
    • The portfolio net cost of trades is $-280. ($20 - $300)
    • The collateral required is max($0, $600 - $280) = $320.
    • $320 is transferred from the user's margin account to the strategy account.

Netting movements

Movements can net off existing positions in either direction. i.e.
  1. 1.
    User has a $10,000 margin account balance and an empty strategy account.
  2. 2.
    User purchases 10 future contracts at $100 each. ($1000 total).
  3. 3.
    User locks 10 long future contracts at $100 each (The maximum loss being $100 * 10 = $1,000). $1000 is transferred to the strategy account from the margin account, so margin account balance is now $9,000.
  4. 4.
    User sells 10 future contracts at $150 each. ($1,500 total).
  5. 5.
    User locks 10 short future contracts which net off with the contracts locked in step 3.
    • The strategy account now holds 0 future contracts and PNL is realised in the strategy account balance. The account bought futures for $1,000 and sold for $1,500, thus realising $500 of profit.
    • The strategy account holds an excess balance of $1,500. ($1000 from initial movement, $500 profit). This is atomically transferred back to the margin account in the same transaction.
  6. 6.
    User's margin account has a balance of $10,500 and a strategy account with a balance of $0. There are no positions remaining in either.
The same applies to a movement unlocking positions from the strategy account to the margin account.
Settlement
Positions in the strategy account will be settled with the same mechanism as margin accounts.
See here.
After settlement, the strategy account balance will contain:
  • Maximum loss of portfolio before settlement +- position profit or loss.
Users will be able to transfer any excess strategy account balance back to their margin account to use as collateral or to withdraw.
Fees
Fees are charged on the locking and unlocking of positions, based off the notional value of contracts moved.
NotionalValue=PriceOfUnderlyingNumContractsNotionalValue=PriceOfUnderlying*NumContracts
Fees are set at 1 basis point of notional value.