All, I am trying to see what is the rate going with different people on how much $ of an account you will need for short selling options. For example, someone with a $10k account will be able to sell fewer options than someone with a $20k account. My question is how do the brokers calculate how much you will be allowed to sell, and what is that amount? NYCDT
For IB Reg T (PM is diff): Short Naked Call = 100% * option market value + maximum (((20% * underlying market value) - out of the money amount), 10% * underlying market value, $2.50 * multiplier * number of contracts). 20% above is 15% for broad based index options. Short sale proceeds are applied to cash. Short Naked Put = 100% * option market value + maximum (((20% * (underlying market value) - out of the money amount), 10% * strike price, $2.50 * multiplier * number of contracts). 20% above is 15% for broad based index options. Short sale proceeds are applied to cash. http://www.interactivebrokers.com/en/trading/marginRequirements/stockIndexOptions.php?ib_entity=llc
Wayne, Thank you for directing me to IB. Can you give a numerical example, as I am not sure how to convert what they are saying for the naked....
Best way is to activate a papertrading account from IB or TOS, then enter the orders and you'll see the margin computed for you. Not all brokers compute margin the same, remember