selling options with no margin requirement?

N

newguy05

Hmm this seems odd, but i just tried on optionsxpress.

Selling Dec 08 puts on futures (ESZ8) at strike 1260. Each contracts i write will have a credit around $5000 but the odd thing is the margin requirement says 0!! yes ZERO!

this has to be some kind of error right? i know options on futures index have a much lower margin requirement than options on stocks. But it cant be zero, this makes no sense. Help?

Entered Trade Price Cost

Sell -10 (ESZ81260P) 101.5 ($50,750.00)

Requirements
Total Cost ($50,750)
Initial Requirement $0
Maintenance Requirement $0
Total Requirements $0
Estimated Commission $129.90
 
fyi just to close this out if anyone else is using the same. I spoke with the futures tech at optionsxpress, basically margin calculation doesnt work for options on futures, so it will dispaly 0...and you wont know your margin requirement until after placing the trade (unless it exceeded your max)

so becareful.
 
You want to become famous?

If so, buy 15,000-20,000 contracts with a 5k account, and trade after hours pressing the "Market price" option

As MF Global rogue trader did.
 
Quote from newguy05:

fyi just to close this out if anyone else is using the same. I spoke with the futures tech at optionsxpress, basically margin calculation doesnt work for options on futures, so it will dispaly 0...and you wont know your margin requirement until after placing the trade (unless it exceeded your max)

so becareful.
More...

Newguy,

You CAN know your short option margin requirements before your broker fills the trade. PC SPAN, purchased from the CME (about $500) will do it. Many use the margin requirement to estimate a reasonable ROI prior to putting a trade on. Of course your brokerage may not use the same margin requirements as the exchanges do so it could be different. I think most brokerages use the exchange minimums though.

Peace and prosperity,
Lar

I still have a bit ot difficulty using PC SPAN because it is not very user friendly.
 
forget pc-span, use occ's calculator for free.

https://cpm.theocc.com/tims_online.htm

go to s & p 500, then look for es. this uses tims methodology instead of span, but they're similar enough for your purposes. again note that some brokers use more stringent margin requirements than this, but this will give you the absolute minimum (no broker will go below this).
 
Quote from blackjack007:

forget pc-span, use occ's calculator for free.

https://cpm.theocc.com/tims_online.htm

go to s & p 500, then look for es. this uses tims methodology instead of span, but they're similar enough for your purposes. again note that some brokers use more stringent margin requirements than this, but this will give you the absolute minimum (no broker will go below this).
More...

Thanks Blackjack007.

I only trade futures but I appreciate knowing about the OCC's TIMS calculator. Regarding futures, they say:

" Inclusion of futures products in a customer portfolio margin securities account is not yet approved by the CFTC."
 
I had an a/cwith Xpresstrade before OX bought them out. The XT platform (web based - nothing to download) was very user friendly. They had a margin calculator and you could play out any scenario, and you could order from their also. I thought OX converted everything on their side but I haven't traded since OX got in, so CBOE calc may be the answer for now.
 
here's another funny from optionsxpress. i guess i should just give up trying to trade options on futures with them and wait until my IB account is funded.

Buy To Open 10 ESH81250P E-mini S&P 500 MAR 2008 1250 P Limit/Sell 2.50 Day Order

Sell To Open 10 ESH81270P E-mini S&P 500 MAR 2008 1270 P Limit/Sell 2.50 Day Order

Estimated Commission $259.80

$260 commission for 20 contracts!!! on top of exchange fees.
 
Quote from lar:

" Inclusion of futures products in a customer portfolio margin securities account is not yet approved by the CFTC."
More...

yeah, you can't cross-margin between futures-based products and equity-based products.

but for guestimating a position of naked puts on es, the tims calculator is good enough (that's all the o.p. wanted).
 
Quote from newguy05:


$260 commission for 20 contracts!!! on top of exchange fees. [/B]
More...

That's normal for (pit traded) Options on Futures, and mostly the options on commodity futures are traded that way. IB will have less commissions, but the selections will be narrow as they will offer only electronically traded options. Of course, that segment is increasing slowly.

If you want to trade options on futures with less commissions, try www.5perside.com The charges are less, but the ordering is not so intuitive. ( If I am not mistaken, they are part of MF Global).
 
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