Collar Strategy with US indices S&P500 (E-mini future/CFD with weekly options)

M

Millionaire_Raj

Basically i want to do collar positions on US indices E-mini S&P500 futures/cfd with weekly options and i want to know margin requirements for the day trading and overnight positions.
looking for lowest margin brokers? im a non-US resident
 
Collaring the index positions, if legs are 1:1, is simply a synthetic bull vertical (short collar; long ES). It doesn't make sense as an overlay, but can be used to lock in some delta.
 
Millionaire_Raj said:
adjustments will be done in collar when required and can close the position earlier which is not possible in bull verticals
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Thanks dude, and that's what I stated. The combined position is a synthetic vertical if the legs are equal in size. The combined position (futures + bear reversal) results in a requirement </= the req on the equivalent bull vertical under SPAN.

Long futures + bear reversal = bull vertical payoff and req.
 
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No one has given a clear solution for you but I went through this shit inside out so I'll save some hassle for you with bittersweet news.

Simple answer is that no one knows. Very few may know if they understand SPAN calculator offered by the CME exchange, but it's quite complicated because there are too many variables. How far is your strike price? Expiration date? What is delta? How volatile the market is according to CME? How much more margin requirement does your broker wanna add as insurance? And good luck finding that out; brokers consider their own internal marginal requirement a proprietary information so they will never tell you. They will simply say try to order it and it will give you how much your margin will be impacted before you confirm the trade order.

Also, a weekly expiration may be dangerous in volatile market as well as where your strike price relative to the market. There is a reason why few play this game, even if it can be a good idea. It is very capital intensive and if you buy straight call/put have fun dealing with theta decay.

In general, I would not recommend flirting with option contracts unless you really know what you're doing or you are being advised by someone who has solid track record of doing it IRL. Leveraged complex securities can be quite punishing to people who donno what they are doing because just as potential profits are highly pronounced, so is the mistakes/losses.
 
neogene said:
No one has given a clear solution for you but I went through this shit inside out so I'll save some hassle for you with bittersweet news.

Simple answer is that no one knows. Very few may know if they understand SPAN calculator offered by the CME exchange, but it's quite complicated because there are too many variables. How far is your strike price? Expiration date? What is delta? How volatile the market is according to CME? How much more margin requirement does your broker wanna add as insurance? And good luck finding that out; brokers consider their own internal marginal requirement a proprietary information so they will never tell you. They will simply say try to order it and it will give you how much your margin will be impacted before you confirm the trade order.

Also, a weekly expiration may be dangerous in volatile market as well as where your strike price relative to the market. There is a reason why few play this game, even if it can be a good idea. It is very capital intensive and if you buy straight call/put have fun dealing with theta decay.

In general, I would not recommend flirting with option contracts unless you really know what you're doing or you are being advised by someone who has solid track record of doing it IRL. Leveraged complex securities can be quite punishing to people who donno what they are doing because just as potential profits are highly pronounced, so is the mistakes/losses.
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Gibberish. The trade is debit-req when the collar is on. IOW you are long ES at 4400 and you short the 4200/4500 reversal. You are now long the 4200 synthetic call and short the 4500 call. The requirement is some nominal figure (under SPAN)that will be less than the debit on the 4200/4500 call spread, never to exceed the initial debit req (without SPAN).

You’re an idiot.
 
destriero said:
Gibberish. The trade is debit-req when the collar is on. IOW you are long ES at 4400 and you short the 4200/4500 reversal. You are now long the 4200 synthetic call and short the 4500 call. The requirement is some nominal figure (under SPAN)that will be less than the debit on the 4200/4500 call spread, never to exceed the initial debit req (without SPAN).

You’re an idiot.
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We can agree to disagree. I don't think I was replying to you directly because you are mainly concerned with collar strategies which is hedged like vertical spread. You don't have unlimited losses like naked shorts. So it is not as relevant for you.
 
Millionaire_Raj said:
Basically i want to do collar positions on US indices and i want to know margin requirements for the day trading and overnight positions. looking for lowest margin brokers? im a non-US resident
More...

gene,

He asked for the margin requirements and lowest margin brokers.

1) While there is a margin req on the completed-collar, it’s nominally lower than the debit requirement on the vertical spread due to SPAN treatment. So it’s moot. You vomited complete BS.

2) All overnight positions must conform to SPAN… so his broker question is moot. The broker will treat the position as a vertical whether it’s traded intraday or overnight. In any event, the collar will reduce the haircut to the vertical under SPAN for carried positions. There is an issue with very wide collars/synthetic verts, but it’s beyond the scope of this moronic thread. Regardless, the margin will be marginally less than the cash req on the synthetic vertical spread. Again, there is an exception, but the trader can assume that while SPAN applies a margin figure to the position, it won’t exceed the cash requirement on the synthetic vertical.

3) The $500 shops don’t let you trade vol. Any $500 shop allowing options would arbitrarily tack on the debit req, thereby deleveraging.

4) Using weeklies implied that he’s bracketing futures like is offered in CFD shops. Regardless of the intent; the collar transmutes the req from a large variation margin req (maint +/- MTM) to a small debit req (improved under SPAN).

His question was answered satisfactorily. You don’t have a clue what you’re talking about.
 
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neogene said:
We can agree to disagree. I don't think I was replying to you directly because you are mainly concerned with collar strategies which is hedged like vertical spread. You don't have unlimited losses like naked shorts. So it is not as relevant for you.
More...

Can we agree to agree you have no clue what you are talking about?

This stuff is like chapter 2 of an options book.
 
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