How to calculate margin for this trade

Discussion in 'Options' started by Derrenoption, Oct 23, 2016.

  1. Hello,

    I wonder how we would go about if we will calculate the margin requirement
    for the below trade?

    Underlying IBM is at 151.26

    Buy to close 1 contracts Nov 150 Call at 3.30
    Sell to open 3 contracts Nov 155 Call at 1.00
    Buy to close 2 contracts Nov 160 Call at 0.24
     
  2. Robert Morse

    Robert Morse Sponsor

    +1 Nov 150/155 calls spread at 2.30=$230
    -2 Nov 155/160 calls spreads at 0.76= $0.76-5.00 =4.24*100*2=$848
    $230+$848=$1078.00
     
    Mirah likes this.
  3. I am sorry, I did use the wrong terminology. All position are "to open".
    So the example should then look like this:

    Positions to enter:
    Buy to open 1 contracts Nov 150 Call at 3.30
    Sell to open 3 contracts Nov 155 Call at 1.00
    Buy to open 2 contracts Nov 160 Call at 0.24


    Then I know wonder how we calculate the margin for above positions.
    I tried to break it down like below. I think "Margin calculation 1" is correct?
    I then wonder how "Margin calculation 2" is calculated?

    Margin calculation 1:
    Buy to open 2 contracts Nov 160 Call at 0.24
    Sell to open 2 contracts Nov 155 Call at 1.00
    $0.76 * 5.00(strikes) * 100 = $380

    Margin calculation 2:
    Sell to open 1 contracts Nov 155 Call at 1.00
    Buy to open 1 contracts Nov 150 Call at 3.30
    = $???
     
  4. Robert Morse

    Robert Morse Sponsor

    I know it was to open, I gave you the correct response, IN DETAIL. First you have to pair off your options into spreads, then calculate the margin on the spreads and then add in the left over naked longs and shorts, if any.

    Maybe this will help you. http://www.cboe.com/tradtool/mcalc/

    Bob
     
    Last edited: Oct 23, 2016
  5. Thanks Bob,

    I found the calculator also, I just was a bit confused of the debitspread as I have not calculated margin on that before. I have looked at your example but I just liked to break it down below.

    So, now if I understand we can break this down to a debitspread and a creditspread like below:

    Question: For a debitspread, we only take: (Buyprice - Sellprice) * 100
    What I mean, what the strike difference is doesn't matter like it does for the credit spread?

    Margin calculation 1: (Debit spread)
    Sell to open 1 contracts Nov 155 Call at 1.00
    Buy to open 1 contracts Nov 150 Call at 3.30
    ($2.30 * 100) * 1 = $230

    Margin calculation 2: (Credit spread)
    Buy to open 2 contracts Nov 160 Call at 0.24
    Sell to open 2 contracts Nov 155 Call at 1.00
    (5 - $0.76) * 100 * 2 = $848

    Total Margin Required: $230 * $848 = $1078
     
  6. Robert Morse

    Robert Morse Sponsor

    Because Reg-T generally uses max loss. Debit spread, what you pay for it. Credit spread, what you can lose, which is the max price-what you sold it for.
     
  7. Thanks for the help and explanation!