SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Well with long shares, you have a slight hedge with the 2 bear spreads so it will reduce the haircut slightly for the long stock purchase to an extent as the long stock purchase also reduces the bear call spread margin slightly. But the bear hedges are limited returns so the benefit is not big.
I am not sure the haircut would be significantly lower than retail in this scenario, but Mav is Obi Wan, I am just the younger, naive Anakin in the 2nd Chapter
I am not sure the haircut would be significantly lower than retail in this scenario, but Mav is Obi Wan, I am just the younger, naive Anakin in the 2nd Chapter
I'll do the haircut calculation for you but give me a real stock and it's current price. Thanks.
Alex, I need an actual ticker. Such as IBM or AAPL. I can't use a hypothetical example, I need real stocks, real quotes. Just find a stock that is close to an even number i.e. 100, 95, 90, etc. Thanks.
IIRC, different indexes have different haircuts most likely as a function of volatility so you'll need to specify an exact index.
For individual equities I believe you look up and down 15% for combined positions (underlying and options) for worst case scenario to determine max risk and that is your haircut. Or if greater, a minimum requirement ($25?) per option contract.
I'm sure Maverick will fill in the details....
MoMoney.
Correctomundo. Mo Money is right on the money. There are many variables that affect haircuts. Price, time, volatility, skew, all those things.
I wrote a nice little piece on this exact thread about 50 pages back comparing haircut to delta. Haircuts are sensitive to delta and therefore are a derivative of deltas. So any variable that affects deltas, will affect haircut, such as all those things listed above.
Also, as Mo pointed out, the indices have more favorable haircut treatment. For the NDX and Russell it's 10% up and down and for the SPX and DJX it's 6% to the upside and 8% to the downside. Minimum haircut on the indices is either $1 or $2.50 per contract.
Mav, I you don't mind could you shed some light on the following?
From the discussions here, I understand that haircut is similar to SPAN in the sense that the margin is not fixed, but based on portfolio risk. Does haircut use risk arrays and then takes the worst possible case as SPAN, or does it use a function where you input things like delta, volatility, etc. and get margin as output?
Also, I seems to me like the main advantage of haircut vs SPAN (besides SPAN being only for futures) is that it allows cross-margin of different underlyings. Is this restricted to specific sets of underlyings (i.e. SPX,ES,SPY,etc. but not IBM) or does it beta weight the whole portfolio against an index and then calculates margin on the whole thing?
Thanks !
From the discussions here, I understand that haircut is similar to SPAN in the sense that the margin is not fixed, but based on portfolio risk. Does haircut use risk arrays and then takes the worst possible case as SPAN, or does it use a function where you input things like delta, volatility, etc. and get margin as output?
Also, I seems to me like the main advantage of haircut vs SPAN (besides SPAN being only for futures) is that it allows cross-margin of different underlyings. Is this restricted to specific sets of underlyings (i.e. SPX,ES,SPY,etc. but not IBM) or does it beta weight the whole portfolio against an index and then calculates margin on the whole thing?
Thanks !