SPAN versus PM question

Discussion in 'Options' started by dcwriter2, Feb 4, 2021.

  1. Ok, I write a SPX OTM call, 4150, expiring at the end of February, and my portfolio margin says it will require close to $40k, which seems high. I write an ES Feb. 26 4150 call, collect the same $1 or so in premium as I would have in the SPX trade, and my SPAN margin hit is only about $8k. I guess I'm wondering if this is normal and why?
     
    stochastix likes this.
  2. stochastix

    stochastix

    great question, if you can show me where I can find out how to independently calculate what the margin requirements are I would be astounded. When I asked IB the only thing they knew was to query it via software, they didnt understand the concept of understanding how the calculation is derived so it could be replicated. apparently the brokers can change the requirements on the fly
     
  3. Cannon_Trading

    Cannon_Trading Sponsor

    i assume this is for SPY options or is this about ES options?

    If ES and futures:

    Span is normal, but remember that span margin will change as volatility and price changes up to and including full overnight margin of 12,100.00 and you will need to cover the premium loses market to the market as the price rises up to and beyond your strike.
     
  4. Yes, talking about ES options.

    So, why would anyone, given the margin differences, trade SPX options, especially naked, rather than ES options, not to mention the after-hours benefit.
     
  5. ajacobson

    ajacobson

    The margin calculation for the SPX option is simply incorrect. Either have your broker recalculate using their PM metric or calculate a non PM margin. Also bear in mind the multiplier difference.
     
  6. Cool. Will do the rechecks. Tks.