SPAN margin question

Discussion in 'Options' started by polpolik, Jun 15, 2007.

  1. Question on span margin

    hypothetically, I'm looking at 2 sets of spreads of some future options with multiplier of x1

    1) Close to the money bear call spread
    2) FOTM bear call spread

    Say if I do (1) and get a credit of $1.00 per contract, and I do 10 contracts for a $10.00 credit

    will the margin requirement be higher than if I do (2) that gives me a credit of .01 per contract and I do 1000 contracts for the same $10.00 credit?

    I know other factors will play in but assuming a very broad generalization, will (2) in general require a lot less margin?

  2. lar


    If I'm hearing you correctly, (1) could quite likely require more margin than (2).
  3. polpolik

    You haven’t said how far apart the strikes are, but assuming they are the same distance in both spreads, then Spread 2 will always require more SPAN margin.

    Look at the leverage – if the underlying gaped up 10% on Monday which spread would you prefer to be running ?

    Well, to save you the bother, where the underlying rallies x% spread 2 will suffer a bigger loss than spread 1.
  4. yeah, im assuming the same spread. But at the precise moment in time when both spreads are executed at the same time (t=0), would (2) still require a larger SPAN margin?
  5. lar


    Sorry... of course you are right... I was thinking NTM Put Bear Spreads and I now stand corrected.
  6. Do you know of any good website for newbies for options trading?

    Thank you
  7. lar