regulations tougher on options?

[DannoXYZ]

It appears options and futures have more regulations and limitations on them than stocks. Here's a couple I've come up with, if anyone has more, please add. Especially helpful if you can cite a specific rule. Thanks.

1. limited life-span of contract
2. can't use options balance for margin
3. maintenance margin required
4. ...

 

[christianhgross]

Quote from DannoXYZ:

It appears options and futures have more regulations and limitations on them than stocks. Here's a couple I've come up with, if anyone has more, please add. Especially helpful if you can cite a specific rule. Thanks.

1. limited life-span of contract
2. can't use options balance for margin
3. maintenance margin required
4. ...

On 2 that is only reg-t that does that. When I have portfolio it does not take that into account. I always thought it strange that a margin increased when the option credit value was added.

Maintenance margin required, if you use IB you already have that today. From an IB client perspective it appears not much will change.

 

[MTE]

I wouldn't say it's tougher. It's different due to the different nature of the product.

And I don't see how limited life span fits into regulation. Limited life span is just one of the characteristics of the product. If they didn't have that then they wouldn't be options and some things that makes them attractive wouldn't be possible. If you don't like limited life span then don't trade them.

 

[Jerkstore]

Stocks require more of a haircut, than either futures or options. A trader can put on the same risk, for less money using futures.

There is mountain of short sale regulations, which in practice results in MUCH higher carrying costs and trading limitations to a stock trader as opposed to a futures trader. With stock positions, the clearing firm scalps you for EVERY LONG AND EVERY SHORT POSITION IN YOUR ACCOUNT. Furthermore when stocks go hard to borrow, a clearing firm will collect 60% (or whatever) rates from its customers with short stock positions, while ALSO collecting the risk free .8% from their long position holders. Most longs don't even realize they are being screwed like this. Then, to boot, the clearing firm can force you to cover your stock short position.

With futures and options, the clearing firm simply adds up the total cash balance and charges you once. The rules to what you can and cant do stay consistent, rather than changing because of hard to borrow and short sale limitations.

Stock are my least favorite product type. Unfortunately I am drawn to the 3500 listed equity options, and thus I trade a lot of stock. If single stock futures ever took off, I would never hold a stock position again.