Trade shows 2 different margin requirements

Discussion in 'Options' started by Derrenoption, Dec 3, 2016.

  1. Hello,

    I have a trade that look like this:
    buy 1 call contract, strike 210, price 1.99
    sell 2 call contract, strike 225, price 0.57
    buy 2 call contract, strike 240, price 0.19

    Now I try to calculate margin requirement for this trade and have come up with
    2 different calculation. As seen, I break down the trade i 2 different ways and come up with
    2 different margin requirments.

    It seems that both approaches are correct but gives a big difference in margin requirements.
    I wonder which one is correct, I might be missing something?

    Thank you!

    ---------------------------------------------------------------
    Margin calculation 1
    ---------------------------------------------------------------
    buy 1 call contract, strike 210, price 1.99
    sell 1 call contract, strike 225, price 0.57
    $142.00

    sell 1 call contract, strike 225, price 0.57
    buy 1 call contract, strike 240, price 0.19
    $1,462.00

    buy 1 call contract, strike 240, price 0.19
    $19
    = $1623 (Margin required)


    ---------------------------------------------------------------
    Margin calculation 2
    ---------------------------------------------------------------
    sell 2 call contract, strike 225, price 0.57
    buy 2 call contract, strike 240, price 0.19
    $2,924.00

    buy 1 call contract, strike 210, price 1.99
    $199
    = $3123 (Margin required)
     
  2. Robert Morse

    Robert Morse Sponsor

    Margin calculation 2 is correct. Optimize by pairing off spreads 1st then use the leftover. That does not mean your clearing firm will do that every time.