Bye-bye reg T

riskarb · Oct 18, 2006

Quote from newbunch:

When will these rules go into effect?

Will future-equity hedges have reduced margins? If I am long ZN and short TLT (not exactly the same things, but very close), will the margin be lower as it should be?

From what I hear, SPAN on futs will be unaffected.

newbunch · Oct 18, 2006

Quote from riskarb:

From what I hear, SPAN on futs will be unaffected.

I'm not asking about SPAN on futures. Right now, if I am long the ZN and short TLT, I have to put up SPAN for ZN and 50% margin for TLT. But it's a hedge trade.

A simpler example would be to be long 1 ES and short 500 SPY. They are exactly the same and the margin required should be close to 0.

momoneythansens · Oct 18, 2006

Quote from newbunch:

I'm not asking about SPAN on futures. Right now, if I am long the ZN and short TLT, I have to put up SPAN for ZN and 50% margin for TLT. But it's a hedge trade.

A simpler example would be to be long 1 ES and short 500 SPY. They are exactly the same and the margin required should be close to 0.

As per earlier posts, I believe there are legal and regulatory hurdles to work out between CFTC and SEC for this type of cross-margining to take place. It is allegedly being looked at though.

riskarb · Oct 18, 2006

Quote from newbunch:

I'm not asking about SPAN on futures. Right now, if I am long the ZN and short TLT, I have to put up SPAN for ZN and 50% margin for TLT. But it's a hedge trade.

A simpler example would be to be long 1 ES and short 500 SPY. They are exactly the same and the margin required should be close to 0.

Gotcha, sorry. I haven't traded TLTs, but I see it's an SEC product.

indahook · Oct 18, 2006

Quote from Il Principe:

Everything has changed. Every nook and cranny of this gigantic English Muffin that we call Trading has been arb'd, what-if'd, stat-mined, spread, re-packaged and regurgitated. There's nothing left to generate outsized returns. Traders have peaked as a skilled group. So, bump the leverage; more dollar power for all. Just wait until some mega-watt vol rips into the market, boy howdy.

That theory is nice
However price is still price
Still most wont make it

newbunch · Oct 18, 2006

Quote from momoneythansens:

As per earlier posts, I believe there are legal and regulatory hurdles to work out between CFTC and SEC for this type of cross-margining to take place. It is allegedly being looked at though.

I think this would be the holy grail for retail investors. To be able to hedge ES with SPY or SPX options with low margin. Or even hedge ES with a basket of individual equities with XX% correlation to the S&P.

Maverick74 · Oct 18, 2006

Quote from giggollo:

Thanks for sharing that info, Maverick. Do you know if they will also provide relief if you are market neutral, like holding $100,000 long equities, and $100,000 short equities simultaneously, without any options being in your account?

No way they will allow that. They are not doing these rule changes for hedge funds but more for mom and pop. Mom and pop don't pair trade.

Maverick74 · Oct 18, 2006

Quote from newbunch:

I'm not asking about SPAN on futures. Right now, if I am long the ZN and short TLT, I have to put up SPAN for ZN and 50% margin for TLT. But it's a hedge trade.

A simpler example would be to be long 1 ES and short 500 SPY. They are exactly the same and the margin required should be close to 0.

No, that is a cross margin issue. You need to have a cross margined account for that.

Maverick74 · Oct 18, 2006

Quote from newbunch:

I think this would be the holy grail for retail investors. To be able to hedge ES with SPY or SPX options with low margin. Or even hedge ES with a basket of individual equities with XX% correlation to the S&P.

That is available now to prop traders who have cross margin accounts. I doubt retail will ever allow that because it requires very active risk management.

riskarb · Oct 18, 2006

Yes, certain prop will have an advantage there, but it's not a regulatory issue.

Hey Mav! MOM and POP are going PROP!