Very true, I have seen a margin jump of 4K to 89K when price jump from 0.10 to 0.15. Is there a way to predict this one? The supplied margin calculator can only calculates the change of stock/index value.
Yes. For a Reg-T margin account, use http://www.cboe.com/tradtool/mcalc/default.aspx For a Customer Portfolio Margin account, the price does not come into account. The formula is different and you can use the OCC website for a base guideline. Your prime broker might ask for more margin. https://cpm.theocc.com/tims_online.htm.
Dolemite, Looking at a 60 days out example - Aug1000P for 100 contracts the margin is 75K. Premium is $1.55 last trade. 1.55/11weeks = 1.55/11 = 0.15 per week. How do you assess the risk between a weekly and a longer expiration term option. As I am typing, SPX dropped to 1279.64, margin just goes up to 78K. Thanks, Frank
I take the SPX down 50 points in the calculator and the Aug 1000P is now 150K. The commission is 10x less but the margin will be a killer also. My broker has a 10%/10%. I am looking for a better broker with a -8%/+6% and my target is SpeedTrader. Their commission rate is also very good. Can save 30%.
-8%/+6% is the occ requirement. i don't think you are going to have anybody offering you that in a retail account.
-8%/+6% is the OCC using the TIMS calculator for Portfolio Margin Haircut, not Reg-T. His clearance firm adds a premium to the SPX minimum haircut. They are "shocking" the portfolio +/- 10%. http://www.optionsclearing.com/risk-management/cpm/
I have seen SpeedTrader and LightSpeed both offering the -8/+6. I'll confirm with them. The other issue is that is it a good idea to split the $$ among different brokers to their insured cash limit (250K?). That way, I'll be in a 100% safe zone for long term. For short option trading, essentially the account is all cash. I can split the option contracts among them and should not be too much extra work. Just a thought.
I don't have portfolio margin but I heard that if you have a lot of contracts at a certain strike and there is suddenly a wide gap between the bid and ask not only does it mess up you p/l but your account could be restricted to closing positions only even if you know the bid/ask is completely wrong. Does anybody have experience with this as I am thinking of adding portfolio margin to my account? I would add that if you have porfolio margin, don't go all in any position and use only about 40% of you buying power. Also, know what you are doing at all times.
One of the company told me that as soon as your equity is down to 20% then you have to 'pay up' the next day. I assume it is by closing the positions. Overall, the margin formula seem to be secret. ANyoe has some PM accountexperience that can share. Frank
It's very simple. If you equity drops below $100K, your account reverts to a Reg-T Margin account unless you add money to bring it back over $100K. If , under Reg-T margin, you don't have enough equity for your position, you have to add money or liquidate your position down to Reg-T requirements. Also, if you have over $100K in your PM account, but your haircut is over your equity, you must add money or reduce your positions to meet current margin requirements.