Where was my math incorrect? I did a RegT calc on IBTWS (for the naked) and the req per credit spread is a hair under $1,400 per. The short put initial req is $13,7xx.
<<< I didn't make an argument for (delta) equivalence as it's not the point. >>> I really have no idea why folks keep trying to change the subject from naked puts vs credit spreads, into a discussion of debit spreads, deltas, and so on. They are all irrelevant to the point of the discussion and debate..
Quote from Appleseed: "And for what it is worth,I will almost guarantee that more money has been lost in the equity markets by naked put sellers than "overleveraged" put spread sellers" Atticus WHY ARE YOU ATTRIBUTING the above quote to me ?? I would say you are brainless...but on second thought ......that would be a compliment cheers john
You stated that you had $100,000 to invest in a 660/640 APPL credit spread. There is a 20 point strike gap. I divide 20 into 100,000 = 5,000 = 50 contracts. If I create a credit spread using that $100,000 (50 contracts), that money is potentially controlling $660 x 5000 shares = $3,330,000. Thus $100,000 potentially controlling $3,300,000 = a 33:1 margin risk. Am i mistaken? As for the naked put seller, i was assuming that $100,000 could be margined to approximately $250,000. Thus enough to buy 4 contracts at your $665 price.
----------------------------------------------------------------------------- ORIGINAL POST CHEERS JOHN
Ok, I was ignoring the credit to keep it simple. But then you are saying I could actually leverage the spread even more than 33:1??? Same with the naked put. But the MASSIVE leverage gap between the 2 strategies, still remains similarly risky and MASSIVE. Correct?
Well considering the fact that I am not clairvoyant and your quoting skills are below retard... it was your mistake, not mine.