Options vs. Stock Margin

Discussion in 'Options' started by Wait4proof, Dec 22, 2011.

  1. Nope, that's my friend Henry.

    And, aapl or goog, same thing, different price.

    All the best,

    Don :)
    #11     Dec 22, 2011
  2. By using the process of elimination I'm left with just one choice.

    #12     Dec 22, 2011
  3. Damn, you outed me alright, LOL. Stupid operation, I thought they said "sex champion" not "sex change" LOL.

    #13     Dec 22, 2011
  4. Maverick74


    It's gotta be the serious looking tough guy all the way on the right in the top pic.
    #14     Dec 22, 2011
  5. And the prize goes to my friend Maverick. I think this photo was taken 6 years before you were born (if the 74 is a clue).

    My grandkids couldn't figure it out, wonder why, LOL.

    #15     Dec 23, 2011
  6. bc1


    Looks like I guessed right too. I figured it had to be the guy that had the prettiest girl.
    #16     Dec 23, 2011
  7. If you want to invest in the stock on an unleveraged basis, and you wonder where you would get a better margin treatment (which means that you will have more cash for alternative use, such as purchasing fixed income securities) you would probably get it through options.

    For example, instead of buying $5,000 of GOOG stock you could buy a synthetic stock (long call and short put). This position will act as the stock itself but instead of needing to put 40% margin you will only have to put around 20% margin (or even less if you have a portfolio margin treatment).

    Except for the margin issue, if you trade this way there will not be any cash outlay at the inception of the trade and that can save you interest expenses if you don't have the cash in your account or can make the redundant cash available for alternative use (as opposed to a stock trade in which even if you get the 40% margin you steel need to pay all of the $5,000 to buy the stock).

    However, if you want not only to get a better margin treatment but also to use leverage, you can buy calls or verticals as mentioned above or you even can buy a synthetic stock in a way that the margin will cover all of the cash you currently have in your account and thereby get a leverage of about 1:5. Nevertheless, using synthetic in that way is a very risky strategy since you can lose an amount which is five times the equity you currently have in your account (as opposed to long calls or verticals in which your loss is limited to the debit paid).
    #17     Dec 23, 2011
  8. Maverick74


    I can't believe that is you. You've really filled out that shirt over the years. :) You see what happens when you sit around and trade and play cards all day?
    #18     Dec 23, 2011
  9. I've played with OTM calls and puts for outright leverage. The time decay and volatility issues pointed out are valid, and your biggest enemy.

    A similar yet lower risk leveraged position can be taken by ITM calls / puts with low time to expiry (~1 mo). This puts the price way up on the straight part of the curve, out of most of the time decay and volatility variance. In a way, you're trying to trade as close to the intrinsic value as possible, but ITM options don't seem to have as much volume / liquidity as NTM's.
    #19     Dec 26, 2011