SPAN margin question

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polpolik

Question on span margin

hypothetically, I'm looking at 2 sets of spreads of some future options with multiplier of x1

1) Close to the money bear call spread
2) FOTM bear call spread

Say if I do (1) and get a credit of $1.00 per contract, and I do 10 contracts for a $10.00 credit

will the margin requirement be higher than if I do (2) that gives me a credit of .01 per contract and I do 1000 contracts for the same $10.00 credit?

I know other factors will play in but assuming a very broad generalization, will (2) in general require a lot less margin?

TIA.
 
polpolik

You haven’t said how far apart the strikes are, but assuming they are the same distance in both spreads, then Spread 2 will always require more SPAN margin.

Look at the leverage – if the underlying gaped up 10% on Monday which spread would you prefer to be running ?

Well, to save you the bother, where the underlying rallies x% spread 2 will suffer a bigger loss than spread 1.
 
Quote from Profitaker:

polpolik

You haven’t said how far apart the strikes are, but assuming they are the same distance in both spreads, then Spread 2 will always require more SPAN margin.

Look at the leverage – if the underlying gaped up 10% on Monday which spread would you prefer to be running ?

Well, to save you the bother, where the underlying rallies x% spread 2 will suffer a bigger loss than spread 1.
More...

yeah, im assuming the same spread. But at the precise moment in time when both spreads are executed at the same time (t=0), would (2) still require a larger SPAN margin?
 
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