Here's an example trade using some approximate data from the initial posting, ie. Spot=10.41 DTE=163 ShortPut: K=9 Pr=4.30 (IV=208) LongPut: K=4 Pr=0.50 (IV=145) MaxProfit=3.8 MaxLoss=1.2 B/E: 5.20 (-50.05% off Spot) Here's the PL diagram: https://optioncreator.com/stvsden Can someone calculate the net profitability of this trade using realistic margin requirement as basis, for the case when spot at expiration is the same?
So most brokers require minimum of $2k to open a margin account. FINRA requires minimum margin equal to 25% of the market value. Brokers must honor FINRA, but can increase margin requirements to their liking. For the example trade in this thread, FINRA requires $225, your broker requires $352.93, Trade Station requires $500. Is that correct? And since the margin account has minimum $2k, this trade goes through. Is that correct?
Can you calculate the profitability of this trade using margin requirement also in percent? Is this calculation correct: 352.93 / (2000 + 352.93) * 100 = 15% ? But in a CashAcct one gets this result for the same trade: CashRequirement = 9 - 4.3 + 0.5 = $5.20 When Spot at expiry is the same as the initial Spot, then : PL = 3.80 PL% = 3.80 / 5.20 * 100 = 73.08% What do you say now? CashAcct is almost 5 times better than MarginAcct ! Isn't it? After all it's pure maths. No cheating here, everybody can verify it and convince him/herself of this fact. I always suspected that MarginAcct is just a BIG FRAUD, a marketing gag! Here's the naked proof, Ladies and Gentlemen! Enjoy The Truth!
Minor correction: The following line... ...must of course be: And the ratio "almost 5 times" comes of course from this comparison: (2000 + 352.93) / 520 = 4.52 Or this way: 73.08 / 16.15 = 4.52