Serious errors found in RegT margin calculation formulas

Serious errors found in RegT margin calculation formulas

Proof: MarginReq is > S

Code:

calc_margin_req ShortCall S=100.0000 K=10.00 Premium=91.0166(fCall=1 DTE=90.00 IV=300.00) :
ITMval=90.0000 OTMval=0.0000
MarginAcct:  InitReq=111.0166 MaintReq=111.0166

Can someone verify & confirm?

Used these formulas of Tradestation: the first is InitialMarginReq, the next is MaintMarginReq:

 

Even CBOE, the exchange (!) itself, has it wrong
https://cdn.cboe.com/resources/membership/Margin_Manual.pdf (page 7 and 32)

 

Imagine this: they demand a margin higher than what the stock costs ,
and additionally on top of it one has to pay also the interest for the margin loan!
Isn't that called usury ?...

 

Get portfolio margin. Problem solved.

 

For this you meed to be relatively rich.
The whole system is wrong b/c the poor people need margin, but only the riches get it...
Ie. the riches get richer, the poors stay poor.
It's all crazy wrong, IMO.

 

Yes, it is crazy wrong.

It's also crazy the benefits that PM gets over Reg-T. And yes, you need well over $125,000 to get PM. The 125K is the minimum. But in actuality, you need about 250K to trade effectively.

 

Is it not 110.000 anymore with IB!
And some other brokers around 200.000-250

But, Yes it is hard to trade with a cash account. Little better with Reg T. But, with port folio PM you can get paid for holding T-Bills, borow/trade on magin, and it mybee exceed your trading platform cost.

 

In the OP an IV of 300 was used.
Using IV=20 gives the same logic error :

Code:

calc_margin_req ShortCall S=100.0000 K=10.00 Pr=90.0000(fCall=1 DTE=90.00 IV=20.00) :
ITMval=90.0000 OTMval=0.0000
MarginAcct:  InitReq=110.0000 MaintReq=110.0000

 

Correction: You need well over $125,000 (or $110,000 for IB) to use PM effectively.

 

Not true for most, that only applies to a small % of people here (i.e. US inhabitants).