Understanding Haircuts

Discussion in 'Professional Trading' started by maae10, Mar 21, 2007.

  1. maae10


    I have been trading options successfully for the last three years on the side and decided to make a career of it.

    I'm a little confused however by the "haircut" margin. What is the typical haircut % that most props offer?

    If one is selling options does the premium you receive count towards your maintenance requirement?

    Is there an article or website that can further educate me about this?
  2. maae10


  3. You cannot buy options (less than 9 months expiration) on margin so don't worry about it.
  4. maae10


    Huh? My friend trades for a place that gives him margin on options. I'm thinking about joining him.
  5. LeroyB3


    Look up Reg T...
  6. Which firm? Why don't you ask your friend?
  7. Where's Maverick? He knows this stuff as he was with (assume he still is) with V-Trader which is all about haircuts.
  8. maae10


    My friend doesn't trade options, he trades stocks and they give him 6X margin. He isn't familiar with how the margin works on option trades.

    He also mentioned that he isn't hindered with Reg T laws and keeps over night positions with margin all the time. Not sure why or how.
  9. This is risk-based margin you are talking about, similar to SPAN for futures/options. There have been several threads about this, and I will defer to Maverick as the expert on this.
  10. maae10


    I got the basic understanding of how it works. I'm just not sure what happens if you sell an option and the strike price is more then 15% away.

    From what I understand there is a $25 per contract minimum but what if the premium you receive covers the minimum?
    #10     Mar 22, 2007