margin on short option positions

The margin requirement formulas of all the brokers I saw (IB, TD Am, and some others) are buggy as hell, IMO!
The above example of @guru also confirms it anew, IMO.

A correct margin req calc must include current IV and the probability for becoming ITM, which the IB & Co formulas are simply lacking.
The current margin req formulas of IB & Co are for the trashcan I can say!
 
Our account is at Schwab. We have never had a margin call. I don't think we have ever even come close, because the size of our positions is pretty low relative to the equity in the account. We don't trade futures. We trade options and stock. We don't sell naked calls. But we occasionally short stock, and we have used margin to establish long stock positions. We trade spreads, including time spreads, that sometimes have meaningful margin requirements because of the distance between the strikes.

I have attached Schwab's margin handbook. The margin requirements for options, including naked short calls, begin on page 13. Schwab's requirements appear to be very close, or identical, to the minimum requirements of the CBOE.

BMK
 

Attachments

thecoder said:
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A correct margin req calc must include current IV and the probability for becoming ITM, which the IB & Co formulas are simply lacking.
The current margin req formulas of IB & Co are for the trashcan I can say!
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A "correct margin calc" must include nothing but what the exchange minimum is. If the broker wants to tack on a lot more, that is their business, and there is no amount of foot stomping and pouting that can be done to change it.

Deal with it, or find a more lenient broker.
 
@Overnight, you unfortunately don't understand the real problem.
Margin req is about risk, and risk must be based on probability, not on some obscure constants like those used currently by the brokers and exchanges, incl. the Schwab formulas above, posted by @BMK.
They are IMO nothing but just ancient and outdated crap formula, nowadays useless and inexact, ie. totally wrong.
Each option strike must rather have its own individual margin requirement, and that even different at any time! Yes, that requires much calculation, but it is easily doable by computers. It can be calculated together with the IV, ie. as a new column, maybe one can even give it a fancy Greek name, like "FairDelta"... :)
Same/similar procedure also for stocks, futures, fx, and what else...
 
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it takes effort to get all the risks right. brokers are better off selling customer order flow to HFT. Gives them much better margins. You have to look at it from the viewpoint of brokers.
 
stochastix said:
I made money you ignorant dickhead. Just like i predicted . Thanks for nothing
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deltaf0rce is fullashit
 
Thats not qqq. Those are profits from premiums from selling vix calls. I posted them a while back and they haven't changed except for remaining within the strangle boundaries
 
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