With the new FINRA margin regulations to be enacted on Dec 1. http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p119906.pdf How does the out of the money amount for short options impact the margin requirement?
The margin is going to increase. The appropriate paragraph is: >> For a listed, uncovered option on a leveraged ETF, the formula above will continue to apply; however, the percentages of the underlying ETFmarket value will be determined using the same methodology as the underlying ETF. Thus, instead of using 15% of the ETFmarket value for a broad-based ETF and 20% for a narrow-based ETF, a leveraged ETF at 200% would use 30% (two times 15%, or 40% for narrow-based) of the market value, and a leveraged ETF at 300% would use 45% (three times 15%, or 60% for narrow-based). << Figure out the nature of the ETF you're looking at and use the appropriate new numbers. You can get some help with margin at the CBOE. They're calculator is at: http://www.cboe.com/tradtool/mCalc/default.aspx and they offer a margin manual at: http://www.cboe.com/tradtool/mCalc/default.aspx Yes, margin can be a PITA
What is your reading of the order of the increased margin calculation. Will they first increase the margin (by 2 or 3) and then back off the Out of the Money amount and still possibly produce 15 or 20% min requirement for deep OTM options. Or back off the OTM amount and then double or triple the requirement.
Check out pages 21-23 of the CBOE margin manual for the SAMPLE CALCULATIONS FOR OPTIONS. That will give you a better chance of figuring out the margin than moi http://www.cboe.com/tradtool/marginmanual2000.pdf