Margin requirements on Iron Condor

K

kalikahuna

So, I noticed that if I do an iron condor the margin requirement is the difference between the two short srtikes...does that mean you can sell as many on either side as you want? I find this incredibly hard to believe.

I set up one for SPX a while back for 5 contracts on each side...but i dont see how my margin requirment would change if it was 10...100...1000...etc., but I think this idea has to be dangerously wrong.
 
Quote from kalikahuna:

So, I noticed that if I do an iron condor the margin requirement is the difference between the two short srtikes...does that mean you can sell as many on either side as you want? I find this incredibly hard to believe.

I set up one for SPX a while back for 5 contracts on each side...but i dont see how my margin requirment would change if it was 10...100...1000...etc., but I think this idea has to be dangerously wrong.
More...

The margin requirement on the iron condor, assuming Reg T margining (i.e. not options on futures), is the difference between the short and the long strike on the same side. That is if the difference is the same on both sides, of not then the larger one is taken.

In other words, yes, the margin requirement on an iron condor is only on side because you cannot lose on both spreads at the same time.

However, the margin depends on the number of contracts. So if you sell one 1340/1350/1400/1410 iron condor your margin requirement would be $1,000. If you sell 5 then it is $5,000; 10 it is $10,000 and so on.
 
For some reason, my broker (TD Waterhouse) counts it as 2 seprate spreads, which means that it requires TWO margin requirements, instead of 1. That does not make sense.
 
Quote from torontoman:

For some reason, my broker (TD Waterhouse) counts it as 2 seprate spreads, which means that it requires TWO margin requirements, instead of 1. That does not make sense.
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Some brokers, mainly those who do NOT specialize in options, require margin on both sides of an iron condor, which doesn't make sense, but you can't really do anything except for using a different broker for your option trades.
 
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