Quick question with regards to margin requirements for vertical spreads and/or iron condors. You have to have a margin account to trade vertical spread but the margin requirement is your max loss on any spread. What is the point of having a margin account if you have to hold 100% cash for each spread? Am I missing something here, can you write spreads for more than what is in your account and thus at that point you would be using margin? Thanks
What's the point of having a margin account? You can take a spread position for say a coupla hundred dollars and not have to pony up the full cost of buying or shorting the stock. The rules are that you need a margin account for short positions. Since vertical spreads include a short leg, VOILA ! And no, you can't margin the debit cost of a spread or the credit received from one. You answered your own question. Your margin requirement is the max loss of the vertical. Period. http://www.cboe.com/tradtool/mCalc/default.aspx
There are two ways to margin this; RegT, and Portfolio. With RegT it is conservative and there is not much you can do. With Portfolio you are margined based on a brokers tweaked VAR calculation. The advantage of Portfolio is that if you structure the portfolio properly you will always have enough money to roll or adjust. Of course this presupposes that you have multiple positions.