Portfolio Margining, example

Discussion in 'Trading' started by stock777, Apr 5, 2007.

  1. From tscm:

    Assume one bought 1,000 shares of IBM at $97 per share and also purchased 10 of the April 95 put options. The margin requirement under the old rules would be $49,400. Under the portfolio margining rules, only $3,650, a 92% reduction in capital, is required to establish this position. For a covered call, that is, buying 1,000 shares of IBM and selling 10 of the April 100 calls, the margin goes from $47,000 down to $12,700, a 72% reduction.


    My question is, does this mean that the actual FUNDS IN USE would be this lower amount, and you would continue to EARN INTEREST on all other funds, or is there some other factor here. ie, The IBM position would only drain 3650 from your 'free cash'.