option margin

[clarodina]

anyone have creative idea on reducing margin for optionshorting?

 

[xandman]

spreads

The tighter it is the more levered the trade. Do enough size and you simulate larger positions than you can typically afford when owning the underlying.

Also, short (debit)calendars have same payoff as a short straddle but no margin requirements.

 

[clarodina]

How do trader cope with the outstanding farther calendar option with the current expired? Covered them at a lose?

 

[xandman]

Loss or gain, your pnl looked like a short straddle. You could be closing at a loss or at a gain depending on where the underlying went.

However, you should close prior to expiration since the gamma risk would be increasing very fast. And the risk you have to get those get extra days of theta (usually the juciest) become proportionally huge. If your strikes are exactly at the money, the flips from positive to negative gamma is an almost meaningless number for proper risk assessment.

Some of the more advanced traders might want to share tips. However, trading horizontals at expiration looks like a coin flip to me.

 

[stock777]

this can happen if the short naked option goes in the money.

 

[clarodina]

This strategy don't seems really worth trading

The differences in theta is little