Using AccountType as a hedging tool for options spread trading

Discussion in 'Options' started by earth_imperator, Mar 19, 2023.

  1. Research results:

    I found out the hard way that there are at least 3 account types for options spread trading:
    1) CashAcct with no SpreadTrading (but one can simulate SpreadTrades)
    2) CashAcct with SpreadTrading (as offered by TradeStation)
    3) MarginAcct with SpreadTrading

    Each of them has a different outcome.
    Example: a Vertical Bear Put Spread (Debit) using Black-Scholes-Merton:

    UnderlyingSpot=100 DTE=30
    ShortPut: K=90 IV=25 (Premium=0.2132)
    LongPut: K=100 IV=25 (Premium=2.8587)

    --> https://optioncreator.com/stlyxtl
    MinPL=-2.6455 @Sx=100.00
    MaxPL=7.3545 @Sx=90.00

    Effective P/L% :

    1) CashAcct with no SpreadTrading (but with simulated SpreadTrade):
    CostBase=92.6455 MinPL=-2.86% MaxPL=7.94%

    2) CashAcct with SpreadTrading:
    CostBase=2.6455 MinPL=-100.00% MaxPL=278.00%

    3) MarginAcct with SpreadTrading:
    CostBase=3.0719 MinPL=-86.12% MaxPL=239.41%

    Conclusions: many... :)
     
    Last edited: Mar 19, 2023