Margin Maintenance Requirements for naked put

Discussion in 'Options' started by jbperez, Aug 11, 2011.

  1. jbperez

    jbperez

    The following is a typical statement regarding how much margin maintenance is required for a naked put:

    "X% of the underlying value less out of the money amount"

    Wouldn't "underlying value less out of the money amount" always equal strike price?

    e.g.

    1) AAPL trading at $390
    2) Holding naked put @ $190

    So underlying value = $390
    OTM amount = $390-$190=$200

    So "underlying value less OTM amount" is $390-$200=$190, but no matter which way the underlying goes, as long as it is above strike price "underlying value less OTM amount" would be exactly equal to strike price, wouldn't it?

    If so, then why use that complicated expression above rather than just say "20% of strike price"?
     
  2. Because doing it your way would result in a different margin requirement for ITM puts.

    The margin req. is premium plus 20% of the UL's price. * IF * the put is OTM, there's an additional criterion.