PC-SPAN: Broken handling of option margin?

Anyone else out there use PC-SPAN, or something similar for calculating margin?

I've read the really basic primer of how it functions... and it sounds mostly reasonable. But the end-result that I'm seeing are really *not* reasonable.

Example, using 8/3 settlement risk parameters from the NYBOT. I plug in these hypothetical portfolios in COCOA (CC):

1)
- short 1 20.00 call, (expiring this week),
- long 1 cocoa future, (trading at 30.00)

2)
- short 1 20.00 put, (same expiration)

I think everyone recognizes that these two portfolios are the same. The short call + long underlying = synthetic put.

Well, SPAN margin requirement for portfolio #1 is $9379.

SPAN margin requirement for portfolio #2 is $29.

Does this seem seriously broken to anyone else? Am I missing anything?

 

Are you using the correct futures contract?

 

I believe so... not rocket science using the software. If anyone else has PC-SPAN, it would be great if they could check my numbers.

Here's the position file:

- actual put
<np>
<exch>NYB</exch>
<pfCode>CC</pfCode>
<pfType>OOF</pfType>
<pe>200909</pe>
<undPe>200909</undPe>
<o>P</o>
<k>20.00</k>
<net>-1</net>
</np>

- synthetic put
<np>
<exch>NYB</exch>
<pfCode>CC</pfCode>
<pfType>FUT</pfType>
<pe>200909</pe>
<net>1</net>
</np>

<np>
<exch>NYB</exch>
<pfCode>CC</pfCode>
<pfType>OOF</pfType>
<pe>200909</pe>
<undPe>200909</undPe>
<o>C</o>
<k>20.00</k>
<net>-1</net>
</np>

 

Let me also add, I stumbled into exploring this because of my actual portfolio. My margin requirements were skyrocketing the last few days, and I couldn't figure out why. Dug into it, and then realized these deep, deep ITM covered call positions were responsible.

 

It's not about rocket science, you have to make sure you are using the futures contract that is the underlying for the particular option (i.e. that the option expires into this futures contract).

 

Heech, call the span people at CME. I've done that before with some pretty obscure questions and actually got hold of someone who knew the obscure answers.

 

Yep, waiting a call back now from the risk management folks at CME.

For some reason I've always thought the "exchange" would be a dark blob with really poor customer service... in reality, I've found the exchanges are a lot more customer friendly (not to mention better informed) then most of the brokers I've dealt with.

 

My actual portfolio has the proper matching futures/options, and margin as calculated by my FCM has been climbing even as I move further away from the strike.

You can also look at the position files I pasted. It's right. 200909 on the future, 200909 on the underlying in the option.

 

I had the same experience. The people at CBOE are lot more responsive and knowledgeble than brokers.

 

Hmm, I just double checked NYBOT maintenance exchange margin for just cocoa futures... and it's only $1600 for non-underlying.

I'm really curious how PC-SPAN ended up at $9300.