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January 25, 2018

Question:How does larger leg rule work on Hedged positions?

Answer:

For some brokers, margin calculation for hedged positions is following a calculation based on the “larger leg”.

This means that the margin required for hedged positions will be the one of the larger side of the hedged pair.

For example:

  • Buy 2 Lots / Sell 2 Lots of the same pair: Margin Required will be for 2 lots.
  • Buy 2 lots / Sell 5 lots of the same pair: Margin Required will be for 5 lots (being the larger leg of the hedged pair).

You should be able to have multiple positions on the same symbol with this type of broker, but the margin requirement won’t be offsetting.

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