Discount brokers futures options margin
Customers who have made four or more securities day trades open and close a stock or option position in a single day within five business days in their account are considered "Pattern Day Traders". The following makes use of the function "Maximum x, y,.. The Maximum function returns the greatest value of all parameters separated by commas within the parenthesis. As an example, Maximum , , would return the value A long and short position of equal number of calls on the same underlying and same multiplier if the long position expires on or after the short position.
A long and short position of equal number of puts on the same underlying and same multiplier if the long position expires on or after the short position. Short a call option with an equity position held to cover full exercise upon assignment of the option contract. Short a put option with a short equity position to cover full exercise upon assignment of the option contract.
Maximum Short securities margin requirement, aggregate Short Put strike. Long option cost is subtracted from cash. Maximum aggregate long call strike - aggregate short call strike, 0. The goal is twofold: You can find a lot more detail on the CME website.
The CME and most other participating exchanges construct 16 scenarios, in which the prices of the individual markets are assumed to move up or down by varying amounts, while volatility is also assumed to go up or down. And what if you are holding positions in some closely-related contracts?
For example, maybe you are long an ES futures contract and short an NQ. Or perhaps you hold an iron condor spread on GC futures options. Or maybe you put on a CL futures calendar spread. Or maybe you wrote a naked put on EC currency futures far from the money.
This is where it gets complicated. SPAN will try lots of different ways of grouping your holdings to compute charges and credits to your overall margin requirement.
So if you add a new contract that truly hedges your existing positions, it will reduce the amount of margin you are required to hold. Exchanges and their clearing organizations must ensure that every trader holds enough margin to cover potential losses.
SPAN tries to achieve both of these goals. It consists of four individual contracts, and a naive risk system using quantity limits might charge you four times the margin of holding just one contract. If you want more functionality and are willing to spend more time , you can also download the PC-SPAN app from CME and import parameter files for the exchanges you are trading.
Using quotes currently in the market, its payoff diagram assuming no early exercise or assignment looks like this:.
How much should we expect to need in margin to hold this position? In this case, SPAN is over 20x more capital efficient compared to a naive quantity limits algorithm. It can enable a trader to responsibly hold many contracts, provided they are properly hedged. Or a calendar spread in the WTI Crude market?