Hello, first of all, why is margin on a naked short ES option about $9500 when the margin on an ES futures contract is around $6000? My second question is: I want to hold a reverse calendar spread until expiration day of the front option. When doing a reverse calendar spread using ES options, the margin is only about $900, but post expiry margin jumps to about $9500. I plan to close the position on expiration day so I won't have the big margin jump, but with interactive brokers, their site says that they auto liquidate if post expiry margin would be more than you have? So in reality, the smaller margin of $900 does me no good, because I have to hold fewer spreads so that I can cover the post expiry amount without getting auto liquidated. Is there a way to get around this somehow? Thanks
Okay, well, with a question like that, you need to not trust any answer you receive, and please, give all of your capital back to its rightful owners.
Well, options + margin = bankrupt. Seriously, if you don't have the speculative cash to back options, don't trade them. If you know enough about options and margin to trade them (on margin), this isn't a question you'd ask. This isn't a strategy OP should be engaged in with margin if he's asking this question...the position itself has its place, but only if very carefully managed...I don't lack in knowledge about options (or risk), but that position exceeds my risk tolerance...and it should exceed OP's too.
If you don't have anything useful to say, please don't respond. I understand options very well. As long as you close a reverse calendar before the long leg expires, you are covered quite well with much less risk than many other option strategies. Hence the much lower margin requirement when you open the position. It only becomes much riskier if you go past expiration and continue to hold short naked options.
The CME exchange required SPAN margin is not $9500 and the same for 1 ES contract, which is under $5000. This is your broker adding their own risk component. For accounts of $25,000 or more, we introduce futures accounts to Wedbush Futures that uses SPAN margin. To monitor risk, each symbol requires approval for a max order size and max position size. I have had no problem getting reasonable limits and with some platforms, getting lower margin for day traders. Why don't you email me your contact information and I'll give you a call later. Bob
The ES option and ES future do not refer to the same size of contract. Hence the difference. The main reason for this is - as I recall that CBOE and other exchanges do not recognise reverse calendar spreads as standard trades. Hence the reduced margin requirements do not necessarily apply unless the broker (like Robert) agrees. It is therefore up to every party in a transaction to determine what they are comfortable with Interactive Brokers obviously isnt keen on this structure - that is their right.
SPAN margin from any call never exceeds the margin on the future. The margin requirement from being long a calendar will always be much lower than being short. $9500 is excessive when initial margin on 2 ES contracts is around $9500.
I can't confirm this is correct, as I'm terrible at using the fee CME CORE margin Calculator. You can contact the CME and they will help you determine the margin. ES MAR/DEC 2050 call spreads Short 1=$869 Long 1= $11 (does not look right as it is a neg number)