Bye-bye reg T

[deviltrader]

Quote from just21:

https://cpm.theocc.com/tims_online.htm

has been updated, they have taken out the index options and replaced it with stocks.

What are the liquid index options that now use PM? Are they all floor traded?

They didn't take out index options, they are still there.

 

[just21]

So if I sell 100 SPX puts with a delta of .5 and want to hedge them then I have to sell 50,000 SPY? Are there any other hedges for SPX in a PM account as selling 50,000 SPY would probably move the market until an arb got interested.

 

[atticus]

Quote from just21:

So if I sell 100 SPX puts with a delta of .5 and want to hedge them then I have to sell 50,000 SPY? Are there any other hedges for SPX in a PM account as selling 50,000 SPY would probably move the market until an arb got interested.

Well, you'd probably want to sell the natural straddle over the SPX put/SPY spot synthetic. I don't believe there is any relief with anything other than SPY.

 

[just21]

What do you mean by the natural straddle?

 

[atticus]

Short 100 atm puts/short 50k SPY = short 50-lot atm call and put.

 

[just21]

I am looking to reduce margin requirement if I am short naked put or call if market moves against me. Turning a naked position into a short straddle wouldn't do that, I presume.

 

[atticus]

Quote from just21:

I am looking to reduce margin requirement if I am short naked put or call if market moves against me. Turning a naked position into a short straddle wouldn't do that, I presume.

The haircut would be less on the natural. Believe what you will.

 

[just21]

I agree, the haircut would be smaller but the natural straddle doesn't reduce your risk that selling SPY would, I presume.

 

[atticus]

Quote from just21:

I agree, the haircut would be smaller but the natural straddle doesn't reduce your risk that selling SPY would, I presume.

Ugh.

Short 100 SPX ATM puts AND Short 50,000 SPY [=] Short 50 of the SPX ATM straddles [S*50 calls, S*50 puts]. They're arb-equivalent until you reduce/increase either side of the synthetic equation.

Going inter-market can only increase the haircut, and it's more costly in execution.

 

[just21]

Portfolio Margin Enhancement

Dear IB Trader,

Modifications are being made to the margin offset for positions in high cap, broad based indices and non high cap broad based indices (some examples: SPX, NDX, OEX, RUT). Margin requirements associated with these positions will be increasing.

As a result of the change previously described, we believe that the requirements will change as follows in this account.


My PM has gone up over 100%! That didn't last long.