Minimum and SPAN margins for options selling

L

LordMib

Hi everyone,
I understand importance of low margins since I've started option selling last year with my national broker. Recently, reading of some books and articles about naked option selling confirms me importance of having a brokerage firm that use minimum exchange margins, or span margins. Also known as option-selling friendly brokers.

I contacted "famous" international brokers like IB, ThinkOrSwim, OptionExpress and OptionHouse and didn't see on their margins tables low levels as I saw on examples found during my reading.

My final question is: does exist a list of option-selling friendly brokerage firms? What are considered the best brokers for selling options?

Many thanks,

LM
 
You have to be more specific about which options you trade? Equity, cash index, futures, commodity,...?

All options on futures have SPAN margining. You can get portfolio margining on cash index options, but you must meet the broker requirements for it.
 
I know from IB that you need a minimum of 100,000 in your account to qualify for the SPAN portfolio margining. Less than that and you do not get it.

Quote from LordMib:


I contacted "famous" international brokers like IB, ThinkOrSwim, OptionExpress and OptionHouse and didn't see on their margins tables low levels as I saw on examples found during my reading.

My final question is: does exist a list of option-selling friendly brokerage firms? What are considered the best brokers for selling options?

Many thanks,

LM
More...
 
Please do not mix Portfolio Margin accounts and SPAN together. You need $100,000 to get Portfolio Margin account. It will mostly affect your margins for OCC options, US stocks, and ONE futures. SPAN will work for any account for products that are margined by SPAN. For example, for all GLOBEX futures and options.
 
Take it from me: Naked option selling is for the birds. All futures brokers use SPAN margin; so margin requirements are the same everywhere. Margin requirements are two and a half times greater than an equivalent bull put spread.
 
Quote from jwcapital:

Take it from me: Naked option selling is for the birds. All futures brokers use SPAN margin; so margin requirements are the same everywhere. Margin requirements are two and a half times greater than an equivalent bull put spread.
More...

I beg to disagree here. On some options it is better to sell naked than sell via a spread. For a large number of the Options on Futures like currencies, and commodities trying to do spreads is very difficult to get any decent price.

So yes naked options require more margin, but in many cases it is good enough.
 
Quote from MTE:

You have to be more specific about which options you trade? Equity, cash index, futures, commodity,...?

All options on futures have SPAN margining. You can get portfolio margining on cash index options, but you must meet the broker requirements for it.
More...

Hi MTE,
thank you for your reply. Actually I'm trading futures on financial index (FTSEMIB, italian market). I'm considering to move on international markets like SPY, FTSE or DJEUROSTOXX but only if I can achieve also better margin conditions.

At the moment for premium of about €110 my broker charge me €1500 or more (naked selling) in margin. So more than 10 times the premium. I read examples in books about options selling of margin made by 2-3 times the premium collected (exemples were mainly on commodities, if can made some difference).

LM
 
Quote from LordMib:

Hi MTE,
thank you for your reply. Actually I'm trading futures on financial index (FTSEMIB, italian market). I'm considering to move on international markets like SPY, FTSE or DJEUROSTOXX but only if I can achieve also better margin conditions.

At the moment for premium of about €110 my broker charge me €1500 or more (naked selling) in margin. So more than 10 times the premium. I read examples in books about options selling of margin made by 2-3 times the premium collected (exemples were mainly on commodities, if can made some difference).

LM
More...

SPY is an ETF, so unless you meet portfolio margining standards you won't get the margins you seek.

However, you can use options on S&P emini futures (ES), which use SPAN margining.
 
Initial margin is irrelevent ... you need to work out your margin when the worst case happens .... otherwise you will be carried out on your shield ..... James
 
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