Definition & Distinction
Definition & Distinction
Margin Requirement And Maximum Risk on the Position
Buying Power / Margin Requirement
This is the capital your broker sets aside when you enter the trade.
It represents the maximum theoretical loss the broker sees based on spreads, not necessarily what you will lose.
It fluctuates with volatility, underlying movement, and adjustments.
Maximum Risk on the Position
This is your real, defined risk once you structure and lock the trade.
For example: an iron condor’s true max loss is the width of the spread minus premium received.
This is usually far smaller than the initial buying power shown on your screen.
👉 Key Point: Margin is a temporary placeholder. Max risk is your actual exposure. Many traders confuse the two — and that’s dangerous.
✅ Benefits of Understanding This
You can scale positions more intelligently — knowing your real risk allows you to use margin more efficiently.
You don’t overestimate risk just because the margin looks large on TOS.
You free up capital faster when you lock trades into condors, reducing margin but keeping high reward potential.
⚖️ Simple Analogy
Think of margin like the “security deposit” your broker holds.
Think of max risk like the “actual damage” you could do.
Condor Nest lets you shrink the deposit (margin) while keeping the damage (risk) capped and predictable — that’s where efficiency and scalability come in.
