SPAN margin

Discussion in 'Options' started by silver217, Apr 5, 2011.

  1. I am trading USA and European spreads with IB.
    I can calculate the margin requirements for USA options, it is clearly explained. But for European options IB uses the "SPAN" methodology.

    IB says this about it:

    we are using the PC SPAN model for calculating our margin, we have some algorithms written in house to add an extra risk margin for a volatile market and as well for options going closer to expiration.
    These algorithms are confidential and we do not give customers access to our algorithms.
    If you need more information about the PC SPAN margin model you can go to the CME webpage. http://www.cme-ch.com/pcspan/

    No explenation there, only a download for 500 dollars for some XP program. I found a similar program here: http://www.lch.co.uk it is free but from 2007 and I could not get it to work.

    Anybody here on this forum that can clarify this ?
     
  2. just21

    just21

    Note your current margin requirement, then goto put on your new position but do not transmit, right click and choose check margin. Take this figure from the previous margin requirement.
     
  3. thank you for your response.
    As you suggested, it shows the margin requirement. But I am
    always surprised by the amount. I like to understand how it
    is computed so that I can answer questions like: What would the margin be in a week from now and what if the volatility goes up
    with 30%.
    Can you predict SPAN ?
     
  4. MTE

    MTE

    What is the underlying that you are trading? Given the information you have provided my guess is that you trade equity and/or index options, which are Reg T margin in the US.
     
  5. Here are the 16 possibilities that SPAN runs to find your maintenance margin:
    http://ibkb.interactivebrokers.com/node/563
    It is no that hard to estimate SPAN margin if you know what you are doing, but you have to be aware that IB often imposes its own additional risk margin on top of that, which I know nothing about. It is the same as Portfolio Margin, it is relatively easy to calculate, but IB charges more than the minimum exchange requirements, so it comes back to figuring out IB requirements.