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short strangles
- Thread starter larryb
- Start date
Just wanted to say I am thoroughly enjoying this thread, and I hope you guys keep it going.
I am also interested in the possibilities with GreenTree in terms of more liberal margin requirements.
I am currently a retail trader at OptionsXpress and although I think their service and platform is phenonemal, retail margin requirements are a hindrance.
I've been paper trading a couple of strategies that look pretty promising but the margin requirements at retail are pretty onerous.
Strategy 1 is selling high IV puts and shorting stock as a hedge and either covering or shorting more as the underlying changes.
OX requires full margin on both the short stock and short puts even though it could technically be a "covered put" for at least part of the position
Strategy 2 is buying long dated low IV calls and shorting stock as a hedge. Again, OX requires full margin on the short stock even though increases in the underlying are fully covered by the long calls and the value of the total position increases as the underlying moves up. The long calls are completely ignored with respect to the short stock.
Anyhow, I'd like to learn more about opportunities at GreenTree and I'm hoping that it appears we are finally getting some really good option trading strategies discussions going on here. I've got some I'd like to submit for some critical review. Thank you.
I am also interested in the possibilities with GreenTree in terms of more liberal margin requirements.
I am currently a retail trader at OptionsXpress and although I think their service and platform is phenonemal, retail margin requirements are a hindrance.
I've been paper trading a couple of strategies that look pretty promising but the margin requirements at retail are pretty onerous.
Strategy 1 is selling high IV puts and shorting stock as a hedge and either covering or shorting more as the underlying changes.
OX requires full margin on both the short stock and short puts even though it could technically be a "covered put" for at least part of the position
Strategy 2 is buying long dated low IV calls and shorting stock as a hedge. Again, OX requires full margin on the short stock even though increases in the underlying are fully covered by the long calls and the value of the total position increases as the underlying moves up. The long calls are completely ignored with respect to the short stock.
Anyhow, I'd like to learn more about opportunities at GreenTree and I'm hoping that it appears we are finally getting some really good option trading strategies discussions going on here. I've got some I'd like to submit for some critical review. Thank you.
Keith,
Sorry, I didn't respond earlier, but I was out of pocket all day today. Thanks much for the detailed info. It does sound very intriguing and I'd definitely like to give it some additional thought. However, my one hesitation at the moment relates to the point GATrader brought up regarding the pooling of capital. While I appreciate your response and have no doubt you folks are expert at managing the risks, it is a bit of a concern for someone like myself who has no experience with the prop trading world to expose my capital to risks totally beyond my control when it is already exposed to significant market risk. This may very well be a function of my own ignorance re prop trading, but at present it's a concern nonetheless.
I'm sure there are numerous posts about how this all works on ET. So I should probably spend some time over the weekend getting up to speed without having to waste peoples' time here. I'll get back to you after the weekend then, if you don't mind.
Regards,
HD
Sorry, I didn't respond earlier, but I was out of pocket all day today. Thanks much for the detailed info. It does sound very intriguing and I'd definitely like to give it some additional thought. However, my one hesitation at the moment relates to the point GATrader brought up regarding the pooling of capital. While I appreciate your response and have no doubt you folks are expert at managing the risks, it is a bit of a concern for someone like myself who has no experience with the prop trading world to expose my capital to risks totally beyond my control when it is already exposed to significant market risk. This may very well be a function of my own ignorance re prop trading, but at present it's a concern nonetheless.
I'm sure there are numerous posts about how this all works on ET. So I should probably spend some time over the weekend getting up to speed without having to waste peoples' time here. I'll get back to you after the weekend then, if you don't mind.
Regards,
HD
MD,
While I have no interest in having Keith lose a new client, I'm pretty sure Optionsxpress is not margining you correctly, at least with regard to your second strategy, the synthetic put. Assuming you're covered on your short stock at least 1:1 with your long calls, they should only be requiring you to put up the lesser of (1) 10% of the call strike price plus any out-of-the money amount, or (2) 30% of the market value of your short stock. That's the plain vanilla Reg T margin requirement, and you shouldn't need any special risk-based margin deal to reduce the amount OX is requiring (though it's certainly possible GreenTree or another prop firm may require an even smaller amount than that). I can't speak to the first strategy since I have no direct experience with it.
Regards,
HD
While I have no interest in having Keith lose a new client, I'm pretty sure Optionsxpress is not margining you correctly, at least with regard to your second strategy, the synthetic put. Assuming you're covered on your short stock at least 1:1 with your long calls, they should only be requiring you to put up the lesser of (1) 10% of the call strike price plus any out-of-the money amount, or (2) 30% of the market value of your short stock. That's the plain vanilla Reg T margin requirement, and you shouldn't need any special risk-based margin deal to reduce the amount OX is requiring (though it's certainly possible GreenTree or another prop firm may require an even smaller amount than that). I can't speak to the first strategy since I have no direct experience with it.
Regards,
HD
Hi guys. HD, I think you are wrong about Option Xpress and Reg T margin . According to Option Xpress Customer Service the margin requirement for a short stock/ long call position would equal 50% of the value of the short stock + the cost of the long option. The same formula would be used for Long Stk/Long Put.
For Short Stk/Short Puts you would have to put up 50% of the value of the stock + 25% of the value of the underlying for the short put. (OUCH!)
I include a page from their web site below
Regards,
Keith
Basic requirements for transactions:
Long Stock Transactions 50% of the purchase price upon initiating the position
40% of the market value for maintenance
100% of the security price for stocks priced $5.00 and under
Short Stock Transactions
50% of the short value (maintenance is 40%)
Covered Call Writing Requires a long stock position equal to the amount of exercisable calls. On a single order combination transaction, the long stock position requirement is not offset by the proceeds of the call until after the transaction.
Unsecured Short Puts & Naked Calls (Equity and Index) 25% of the underlying market price + the premium - amount out of the money OR
10% of the underlying market price + the premium, whichever is greater.*
Cash Secured Short Puts 100% of the exercisable value.
Short Straddles The greater of the short put or short call requirement, plus the current premium of the leg with the lower requirement.
Debit Spreads 100% of the debit amount upon initiating the transaction.
Credit Spreads 100% of the difference between the strike prices multiplied by the number of contracts, credit from the proceeds included.
Long Butterfly 100% of the debit amount upon initiating the transaction.
For accounts engaging in Uncovered (Naked) call writing and naked index option writing a minimum account value of $100,000.00 must be maintain
For Short Stk/Short Puts you would have to put up 50% of the value of the stock + 25% of the value of the underlying for the short put. (OUCH!)
I include a page from their web site below
Regards,
Keith
Basic requirements for transactions:
Long Stock Transactions 50% of the purchase price upon initiating the position
40% of the market value for maintenance
100% of the security price for stocks priced $5.00 and under
Short Stock Transactions
50% of the short value (maintenance is 40%)
Covered Call Writing Requires a long stock position equal to the amount of exercisable calls. On a single order combination transaction, the long stock position requirement is not offset by the proceeds of the call until after the transaction.
Unsecured Short Puts & Naked Calls (Equity and Index) 25% of the underlying market price + the premium - amount out of the money OR
10% of the underlying market price + the premium, whichever is greater.*
Cash Secured Short Puts 100% of the exercisable value.
Short Straddles The greater of the short put or short call requirement, plus the current premium of the leg with the lower requirement.
Debit Spreads 100% of the debit amount upon initiating the transaction.
Credit Spreads 100% of the difference between the strike prices multiplied by the number of contracts, credit from the proceeds included.
Long Butterfly 100% of the debit amount upon initiating the transaction.
For accounts engaging in Uncovered (Naked) call writing and naked index option writing a minimum account value of $100,000.00 must be maintain
Keith,
I don't doubt that OX does require that. My point was, they are wrong in doing so. But I may now have to retract my exemption of OX from the "know-nothing" descriptive I used in a prior post.
Regards,
HD
I don't doubt that OX does require that. My point was, they are wrong in doing so. But I may now have to retract my exemption of OX from the "know-nothing" descriptive I used in a prior post.
Regards,
HD