I will be sitting my Series 7 in a few weeks time and want to start trading Options and shares with a Prop Firm. I have a question about Margin,the example is below. I would be holding these Positions for a few days so the Margin would be worked out on OverNight Calculations, 1)Short 1000 DIA at $99.00 2)Buy 20 DIA Jan 05 100 Strike Calls at $5.60 I would have to pay $11,200 for the Options.Once I had the Options how is the Margin on the Short 1000 Dia Shares worked out because there would be no risk due to the Option Position totally hedging the 1000 short Dia Shares.I know how this is calculated in retail Accounts but whats the difference when Trading with a Prop Account,feedback appreciated
The avergae firm wil likely charge the whole call position. (11, 200) Plus, about 30% of the stock value (as if it were a long positon.) If you are going prop. It will be a "haircut." This is usually the amount of money to cover an adverse move of 15%. Hope that helps...