Options Margin
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Transcript of Options Margin
Option type Example Margin Req. Formula Cash Req:
Equity options: (short) sell 1 xyz Feb. 35 put @ 320% of the maket value of the underlying stock (-) any out of the money amount, but not less than 10%
of the underlying's value (+) the premium. Note: You must calculate 20% of the market value of the
underlying stock, not the strike price.
margin requirement (-)
the premium received
Call spread margin:buy 1 abc Oct. 50 call @ 5,
sell 1 abc Oct. 40 call @ 8
Under certain circumstances, the long position may serve as margin (or cover) the short position. If the
long position expires at the SAME DATE or A LATER TIME than the short position; and the exercise
price of the long position is the SAME or LOWER than the short position NO MARGIN is required. If the
long position expires at the SAME DATE or A LATER TIME than the short position; and the exercise
price of the long position is HIGHER than the short position MARGIN is the LESSER of the difference in
exercise prices OR the margin on the short position.
margin requirement on
the short call (+) margin
requirement on the long
call (-) the premium
received on the short
call
Put spread margin:buy 1 abc Nov. 40 put @ 8,
sell 1 abc Nov. 50 put @ 5
Under certain circumstances, the long position may serve as margin (or cover) the short position. If the
long position expires at the SAME DATE or A LATER TIME than the short position; and the exercise
price of the long position is the SAME or HIGHER than the short position NO MARGIN is required. If the
long position expires at the SAME DATE or A LATER TIME than the short position; and the exercise
price of the long position is LOWER than the short position MARGIN is the LESSER of the difference in
exercise prices OR the margin on the short position.
margin requirement on
the short call (+) margin
requirement on the long
call (-) the premium
received on the short
call
Short straddlessell 1 xyz Oct. 130 call @ 5,
sell 1 xyz Oct. 120 put @ 7The greater of the margin required for either component of the straddle (+) the requirement of the other
component. 20% of CMP (+) premium on a put (+) premium on a call (=) the margin requirement
margin requirement (-)
the net premium
received
Foreign equity options: sell 10 bp Dec. 60 puts100% of the premium (+) 4% of the value of the underlying. Margin may be reduced (-) for out of the
money options, but never below the premium (+) 0.75% of the underlying.
margin requirement (-)
premium received
Index options:sell 1 S&P-100 Index 860
call @ 2.78
100% of the premium (+) (either) 20% of the index value for (narrow-based). (OR) (+) 15% of the index
value for (broad-based). The basic requirement can be reduced by out-of-the-money options, but it can
be not be lower than the premuim (+) 10% of the index value.
margin requirement (-)
premium received
T- bill options:
Sell 1 uncovered T-bill may 92
put @ .70 The yield @ 8.5% so
Mkt. price = 100 (-) 8.5 = 91.50
(in the money).
.35% of the underlying principal amount (always $1,000,000 face value of 13 week T-bill contract so
$3,500 per contract) (+) the premium (-) any out-of-the-money amount, with a minimum margin
requirement of 0.05% (always $500 per contract) of the underlying principal (+) the premium. (Use basis
points 70 (x) 25 = $1,750 to calculate the premium).
margin requirement (-)
premium received
T - note options:
Sell 1 uncovered T-note June
104 put @ 1.4. The t-note has a
price of 103 so out of the money
so both calculations required.
3% of the underlying principal amount (always $100,000 face value of a T-note contract so $3,000 per
contract) (+) the premium (-) any out-of-the-money amount, with a minimum margin requirement of
0.50% (always $500 per contract) of the underlying principal (+) the premium. Use 32nds 1.4 or 1 &
4/32nds or $1,125 to calculate the premium).
margin requirement (-)
premium received
T - bond options:
Sell 1 uncovered T-bond
Dec.102 call @ 6.20 The
underlying T-bond is selling at
107.18.(in the money).
3.5% of the underlying principal amount (always $100,000 face value of T-bond contract so $3,500 per
contract) (+) the premium (-) any out-of-the-money amount, with a minimum margin requirement of
0.50% (always $500 per contract) of the underlying principal (+) the premium. (Use 32nds 6.20 or 6 &
20/32nds or $6,625 to calculate the premium).
margin requirement (-)
premium received