SPX Credit Spread Trader

Quote from Maverick74:

Haircut on the SP is 6% to the upside and 8% to the downside. Yes, it is fixed. The problem with span is it's variable margin. Meaning it can go up on you without notice and force a liquidation. And it usually happens at the worst possible time during a big selloff. I've seen span margin double overnight. And if you can't meet it, they liquidate. Span also does nothing for the long gamma trader. In other words, when you buy options, you have to pay 100% of the premium. Span is only useful if you sell naked options.

Also with span, you can't mix and match products. If you trade ES options, you will get relief on your margin if you trade ES futures against it, but nothing else. With a haircut, you can trade, spy options, es options, spx options, oex options, spyders, even dow, nasdaq, russell options and futures and ETF's and get haircut relief on all those products as one big position.

There really is no comparison between the two. Span is very limiting. Haircut and cross margin is much more flexible and all encompassing.
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For haircut margin, the maintenance margin will change with the index level. Is it MTM? So we still need to have a cushion for the margin change.
 
I am still using ameritrade as my option broker. I found many people use TOS or IB here. Can anyone tell me the difference?

Currently I am looking to have streaming option quotes (Level II), and streaming greeks, and want to have a DDE link to excel.

If I can get a historial IV for individual stocks, that will be great.
 
Tradestation is a good all around broker for futures and charting combined.


Thinkorswim now has great charts along with futures trading and I think you can trade off the charts now as well.


Quote from rbsanders:

Anyone know of a futures broker that has a good real time charting package with it. thanks
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Quote from domestic:

mav, i have 12 years writing, spreading etc. so my question is based on that background.
i am guilty of being a large span user, and intend on staying in this game indefinitely. so...... can you guide me to where to start the process of obtaining haircut status? i am clear that it may not be easy, but i am sure many here would appreciate your opinion on whether it is possible and how to start.
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Haircuts are obtained by being a member of a JBO (joint back office). You can either start your own JBO or join one. It's pretty cost intensive to start and maintain your own JBO so the better route is to join one. Some prop firms have JBO status, some do not. If you join a prop firm that has a JBO setup, you need to become a member of both that JBO and the exchange in which they are affiliated with.
 
Quote from ryank:

From what I have gathered on this board Maverick owns/runs/manages (not sure which) a prop firm. As you probably know, a prop firm is where you will be able to get haircut margin. I'm not familiar with any of them but I know if you do a quick search on ET you will find a number of them mentioned in different threads.
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I run the Chicago office for a prop firm based out of SF. There is quite a bit of info on ET if you do a search for haircuts and prop firms. You can also google it.
 
Mav talks a lot about Joint Back Offices. Unfortunatley I found out he mainly smokes joints in the back office :D.

Sorry Mav, too easy to pass up..


Quote from Maverick74:

I run the Chicago office for a prop firm based out of SF. There is quite a bit of info on ET if you do a search for haircuts and prop firms. You can also google it.
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Quote from yip1997:

For haircut margin, the maintenance margin will change with the index level. Is it MTM? So we still need to have a cushion for the margin change.
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Haircuts are calculated daily. So yes, like span, they change as the underlying moves up and down and as times goes by. The problem with span is that the margin levels themselves can change and quite dramatically around volatile events or volatile markets. They can double or triple overnight. So if you use span too aggressively, you could be in a situation where you have no control over your position.
 
Quote from optioncoach:

Mav talks a lot about Joint Back Offices. Unfortunatley I found out he mainly smokes joints in the back office :D.

Sorry Mav, too easy to pass up..
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You are on a roll. Do I need to pay a cover?:D
 
Quote from jeffm:

This is not an apples-apples comparison.

First, selling a near ATM ES option has almost the same margin as holding the futures contract outright. Which makes sense, as your risk is similar between the two positions.

Second, you're comparing an naked option with a spread. That's perfectly fine and valid, but don't call it a follow up on margin requirements. If you want to compare ES and SPX margin, show both of them with a naked option sale, or both of them with a spread. But not naked versus spread.

Third, if you want to collect 3.25 points of premium to compare with the SPX 1260/1250 spread, try selling 2 ES 1210 puts for 3.30. Overnight margin for the 2 naked 1210P is about $4000. For $10k margin to compare with your SPX spread, you would collect $825, versus $325 for the spread. Obviously the risk/reward and %win/loss greatly differs between the two trades. Or compare the ES spread which collects about 2.5 pts, but has a margin for the spread of about $400.

I leave it to the reader to choose their own r/r and %w/l. But at least make sure you are looking at the right numbers to make the comparison.
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Point taken, thanks :)
 
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