Any suggestions for reducing margin for this case?

A

alf111

Example I’m buying 100 shares of GOOG at 3000 with a hard stop at 2950. That gives my max loss at $5000.

This requires a margin of $300000. (Or around 75k with a margin acct)

Compare this to buying 100 shares of ABC stock at $200, with a stop of $150. Same max loss at $5000, but requires a margin of $20k.

Same risk to me but eats up only 10% of the margins.

Any suggestions how could one reduce the margin requirements assuming a hard stop is involved? (I am aware there could be slippage from stops and it isn’t a real hard stop at X price)

I could only be risking 8-10% of my portfolio with 10-20 trades at 0.5% each, but I’ve already hit my margins and couldn’t open anymore. And if most of the trades are in the green I wouldn’t want to close them for the sake of just opening positions.
 
The MarginReq formula used by the brokers are totally BS (I'm saying this for a long time now), your example demonstrates it very good.
 
PM or Reg. T, PM buy a put and the margin should become the synthetic call made by the
+stock -put or just buy the call as a substitute.
 
I see a lot of people complaining of high margins. But I think that is a good way to get risk down. I'll also avoid any brokers who give you very high margins. The higher the margins, the quicker traders can crash.

You want to live another day, another week.
 
alf111 said:
Example I’m buying 100 shares of GOOG at 3000 with a hard stop at 2950. That gives my max loss at $5000.

This requires a margin of $300000. (Or around 75k with a margin acct)

Compare this to buying 100 shares of ABC stock at $200, with a stop of $150. Same max loss at $5000, but requires a margin of $20k.

Same risk to me but eats up only 10% of the margins.

Any suggestions how could one reduce the margin requirements assuming a hard stop is involved? (I am aware there could be slippage from stops and it isn’t a real hard stop at X price)

I could only be risking 8-10% of my portfolio with 10-20 trades at 0.5% each, but I’ve already hit my margins and couldn’t open anymore. And if most of the trades are in the green I wouldn’t want to close them for the sake of just opening positions.
More...
Think of that 300,000 amount as instead a purchase price of a house (it is actually much higher these days) and you
A) had a low FICO score and had to put down 50%
or
B) had an average to above FICO score and had to put down 25%.

Fell better? Probably not but none of us make the rules we all have to follow to play the game.
 
alf111 said:
Example I’m buying 100 shares of GOOG at 3000 with a hard stop at 2950. That gives my max loss at $5000.

This requires a margin of $300000. (Or around 75k with a margin acct)

Compare this to buying 100 shares of ABC stock at $200, with a stop of $150. Same max loss at $5000, but requires a margin of $20k.

Same risk to me but eats up only 10% of the margins.

Any suggestions how could one reduce the margin requirements assuming a hard stop is involved? (I am aware there could be slippage from stops and it isn’t a real hard stop at X price)

I could only be risking 8-10% of my portfolio with 10-20 trades at 0.5% each, but I’ve already hit my margins and couldn’t open anymore. And if most of the trades are in the green I wouldn’t want to close them for the sake of just opening positions.
More...

Buy Dec.17 2600/3350 Call Spread for ~384 ($38,400). No premium (time decay).
Max loss ~384 ($38,400).
Max profit ~366 ($36,600).
Limits profit but a 12% move in ~40 days would be acceptable?
Open a new spread shortly before expiration if you'd like to hold the position.
 
Just to add on.

I’m not complaining about why the broker does it, it’s perfectly sensible as GOOG could drop to $500 tomorrow, no one cares about my 2950, and blow past my stop and they need to cover for that. And yes on a PM account.

Good points on the options, I trade a bit options on a separate portfolio so got a little bit of knowledge there. Getting stock trades right directionally is hard enough, if I’ve got to manage the IV and Greeks, it becomes over complicated. I could add a put option strike as my stop as a possibly some members pointed out.

Plus furthermore my stops are on very specific technical levels so options may also be out of the picture for most of them

I know there may be a chance there is no ideal solution for this but just throwing out here and seeing if I could be missing anything.
 
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RedSun said:
I see a lot of people complaining of high margins. But I think that is a good way to get risk down. I'll also avoid any brokers who give you very high margins. The higher the margins, the quicker traders can crash.

You want to live another day, another week.
More...
Yeah definitely agree with this comment and similar to what I would of said
 
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