What is Cross Margin (Derivatives Trading)?

Cross margin, or spread margin, is a form of margin trading that uses the full amount of a user's available account balance to avoid liquidations. By using cross-margin trading, any realized profit and loss (PNL) helps add margin on a losing position. Cross-margin trading is helpful for users that are hedging existing positions and also for arbitrageurs that want to limit their exposure to the losing side of a trade in the event of a liquidation. Cross-margin trading is the opposite of isolated margin trading, which only uses isolated portions of the account balance for each trade.