Naked Straddle Margin Requirements

[Trevor Schilling]

I've written a program that models future stock volatility for all equities and have been trading on the long side via ATM straddles for the past 6 months.

Revisited the short side (options overpriced) recently and was hoping to get some ideas on how to trade. The most straight forward would be a naked ATM straddle but IB margin requirements are 3-10x your credit (portfolio margin acct). Here is how they calculate the margin:

Stock Options
Call Price + Maximum ((20% 2 * Underlying Price - Out of the Money Amount),
(10% * Underlying Price))

Are there other brokers that are less conservative (knowing this strategy carries plenty of risk) in the margin calculation?

I've back tested a variety of spreads (vertical/calendar/iron butterfly but you give up much of edge in attempt to reduce margin requirements (and risk).

Thanks,
Trevor

 

[comagnum]

Why does 'naked straddle' always make me think of the 'iron condom' or whatever you call it.

 

[Overnight]

Why does 'naked straddle' always make me think of the 'iron condom' or whatever you call it.

ROFL

 

[drcha]

What about just buying some tails way out there? I usually do that, spending about 5% to 10% of the credit from the body of the spread. Peace of mind.