Margin calc interpretation

Discussion in 'Options' started by marsman, Jun 22, 2016.

  1. marsman

    marsman

    Where have you got that riskless stuff from?
    Some spread and other multi-leg trades can indeed be riskless, but it's not easy to get a fill.
     
    #11     Jul 2, 2016
  2. donnap

    donnap

    It's not a matter of what's fair. The margin for selling options is arbitrary. What would be fair is if the margin was only the market price of the options.

    But brokers have to protect themselves from traders that go overboard with leverage. So they set a higher margin. This is based on a history of some traders losing large amounts and brokers may lose as well when traders go bankrupt.

    We all "pay" for that.

    But it is the rules of the playing field. Like it or not, it's what you get.
     
    #12     Jul 2, 2016
  3. newwurldmn

    newwurldmn

     
    #13     Jul 2, 2016
  4. marsman

    marsman

    @newwurldmn
    FYI: PL=0 does not mean riskless as one loses the possibility of a profit, ie. one pays the so called opportunity cost.
    Dictionary definition: the loss of potential gain from other alternatives when one alternative is chosen.
     
    #14     Jul 2, 2016
  5. newwurldmn

    newwurldmn

    PL>=0 is exactly the definition of riskless.
     
    #15     Jul 2, 2016
  6. marsman

    marsman

    It depends whom you ask... :D
    Read the "opportunity cost" definition at wiki or in other dictionaries.
    Because: imagine you make always a profit because say you are a shop owner, and then you try a more lucrative deal, but it unfortunately doesn't work out and you get out of the deal with 0 profit.
    So, your PL is 0, but still you made a loss, because with your normal strategy the PL would be most probably > 0 like was the case all the time in the past...
     
    Last edited: Jul 2, 2016
    #16     Jul 2, 2016
  7. newwurldmn

    newwurldmn

    Riskless means without risk (not over some arbitrary opportunity cost).

    I look forward to hearing more about your arbitrage call selling strategy.
     
    #17     Jul 2, 2016
  8. marsman

    marsman

    Have I ever announced anything like that? Maybe I'm getting older... :D
    I'm currently fixated in Put selling because IMO it has some significant advantages over Call selling.
     
    #18     Jul 2, 2016
  9. newwurldmn

    newwurldmn

    Perhaps senile too.
     
    #19     Jul 2, 2016
  10. marsman

    marsman

    Yeah right, that word escaped me... :D:D:D
     
    #20     Jul 2, 2016