NDX Options

Real Money

Real Money

I'm interested in trading the index options. Now, currently I trade index futures but I am considering the NDX options and SPX options in the future. I am familiar with Reg-T for stocks and SPAN for futures but know nothing about index options margining. Just a couple of questions. I like the fact that these are cash settled European style.

What is the margin for the basic

NDX ATM Call
NDX ITM Call (few strikes)

SPX ATM Straddle

Simple spread examples would be cool.

What's your opinion on trading these intraday? Mostly just long. Can small guys trade these? How much of an account is required to do this stuff? I got 100k.

Also looking for war stories, or anything else you got pertaining to these index options vs other instruments. Thanks.
 
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This looks like one of those questions that as soon as you even attempt to trade options you’ll have no more interest in.
Margins vary wildly between brokers while your broker shows you how much margin will he used by your order before you submit it. Some brokers like IB are proactive in reserving more margin than regulatory requirements, TDA sometimes gives me more slack than expected, Tasty Works calculates margin completely incorrectly, while it all also depends on your concentration in a single index, as well as on positions offsetting each other. On Facebook I was exchanging screenshots showing margin use on the same options between users using different brokers, and each one was different. While I also have complex options positions on SPX like ratio spreads where selling additional puts will give me more margin instead of subtracting ridiculous amounts of margin.
Your margin use can also fluctuate as its being adjusted overnight and I’ve had days where it went from $100k available margin to -$100k negative overnight, but only required spending $30 on a few cheap SPX puts to get back to positive.
You should simply start with creating an order and see how much margin your broker will display as being reserved, before you place/finalize the order.

Though if you’re just buying options and basic spreads then the margin used will be usually the cost of the options, or max loss. Only selling more options than buying often requires much more margin.
 
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You may want to consider opening a Portfolio Margin account. This will potentially reduce your margin requirements. It will require a bit more then 100k, I think IB is 110K for example.
 
guru said:
This looks like one of those questions that as soon as you even attempt to trade options you’ll have no more interest in.
Margins vary wildly between brokers while your broker shows you how much margin will he used by your order before you submit it. Some brokers like IB are proactive in reserving more margin than regulatory requirements, TDA sometimes gives me more slack than expected, Tasty Works calculates margin completely incorrectly, while it all also depends on your concentration in a single index, as well as on positions offsetting each other. On Facebook I was exchanging screenshots showing margin use on the same options between users using different brokers, and each one was different. While I also have complex options positions on SPX like ratio spreads where selling additional puts will give me more margin instead of subtracting ridiculous amounts of margin.
Your margin use can also fluctuate as its being adjusted overnight and I’ve had days where it went from $100k available margin to -$100k negative overnight, but only required spending $30 on a few cheap SPX puts to get back to positive.
You should simply start with creating an order and see how much margin your broker will display as being reserved, before you place/finalize the order.

Though if you’re just buying options and basic spreads then the margin used will be usually the cost of the options, or max loss. Only selling more options than buying often requires much more margin.
More...

Margins don't really vary a ton; unless you're referring to RegT vs. PM.

IB uses RegT.

TDA does not give you "more slack" than RegT.

TT calculates PM using TIMS and concentrations are basically in-line with TIMS.

OK, no way you're seeing a $200K var in haircut overnight.

$30 SPX puts? Where are they smoking those?

Your post is utterly devoid of any useful information.
 
destriero said:
Margins don't really vary a ton; unless you're referring to RegT vs. PM.

IB uses RegT.

TDA does not give you "more slack" than RegT.

TT calculates PM using TIMS and concentrations are basically in-line with TIMS.

OK, no way you're seeing a $200K var in haircut overnight.

$30 SPX puts? Where are they smoking those?

Your post is utterly devoid of any useful information.
More...

Simply try selling SPX ratio spreads or even single calls and puts on IB vs TDA and compare. Actually it’s worse on TDA for SPX but I was getting better margin on VXX etf ratios at TDA and remember it.
By $30 SPX puts I meant just three $0.10 puts that expire in a week, like 2500 or 2600 strike. They sometimes fix my margin when I have a 100 longer-term put ratios or back ratios like 1600/1400.
Sometimes I also have higher strike back ratio spreads that start eating tons of margin as they near expiration. IB will calculate risk on portfolio margin based on SPX dropping 20%, which sometimes could result in huge profits and other times in huge losses when using ratios. I’ve spent couple years juggling margin use...
 
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destriero said:
Margins don't really vary a ton; unless you're referring to RegT vs. PM.

IB uses RegT.

TDA does not give you "more slack" than RegT.

TT calculates PM using TIMS and concentrations are basically in-line with TIMS.

OK, no way you're seeing a $200K var in haircut overnight.

$30 SPX puts? Where are they smoking those?

Your post is utterly devoid of any useful information.
More...

Actually a good example for huge margin drop may be diagonals or calendars, say +1x 2000P near term / -1 2000P longer term (x quantity of those). As your near term puts get close to expiration then you’re being left with short SPX puts that require shitload of margin. You could then “fix” your margin by buying a few cheap 2500 puts for $0.10 each. This could be even the situation I was in, though applying to ratios that would be spread over calendar. ( I’d alternate between long vs short/back ratios over calendar, thus creating such “margin situations”)
 
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Here are some notes on the product:
- NDX is Cash-Settled, European Style
- NQX is 1/5 the notional size and still tracks the Nasdaq 100. Monthlys and Weeklys – all PM Settled
- Monthly Third Fridays are AM Settled
- Weekly Expiries have the root symbol NDXP and are PM Settled, they are available on Fridays other than third Friday and Wednesdays
 
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