SPX weekly options Etrade wants massive increase in margin exp week?

D

darp

Hi, have switched from SPY to SPX options in last week and so far everything wonderful. 1/10th the comms, better taxes, getting great fills, happy as a pig in mud. Then today get $280,000 cash call because Etrade does something in their risk department a new policy. That is on weekly SPX options in the week prior to Friday exp they jack up margin 5 times because it is euro style options (safer than Amer, no exercising???). Has anyone encountered this? I think Etrade is only one, but will try and resolve tomorrow. Exchange says nothing about more margin in exp week.

I just went on Fidelity and put same trade in and it wanted $6200 marg, Etrade was $3,000 last week $17,000 this week. Strange thing is the risk worst case in -$1,000, it is a diagonal spread.

Has anyone every heard of such a thing on exp week?
 
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qwerty11 said:
NO
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Thanks. In general has anyone noticed a broker that is better at margin on option spreads such as diagonals?

It can make a big difference. I do not want leverage but if a trade has a $1,000 max loss no matter what and one broker is $3,000 margin, another $10,000 another $1,000 well if it a positive expectation trade you can make 10 times more profit at one broker than another. Outside of buying calls or calendar spreads that use margin proportion to total loss possible many spreads are charged 10 times or more margin than max loss.
 
PM doesn't make it better. Think about when you get the exercise and what alternatives you have. E trade isn't stupid - work through your strategy and you'll see why firms are not crazy. The article your quoting is a decade old. The firms began applying the new treatment around mid decade.
 
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ajacobson said:
PM doesn't make it better. Think about when you get the exercise and what alternatives you have. E trade isn't stupid - work through your strategy and you'll see why firms are not crazy. The article your quoting is a decade old. The firms began applying the new treatment around mid decade.
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There is no exercising on SPX options, it is euro style. The danger of AM ones is you do not know what price your will get, they decide that the next day.

It is common for margin to be way off. On a trade with max loss of $1,000 Fid charges $6,000 and Etrade $3,000 last week and $15000 this week. It is because as that article says they charge for max risk both ways when it is impossible for it to go both ways at the same time.

I have talked with the brokers the last two years about this general issue and they agree. They say they are forced by the exchanges to charge what they charge even though agree makes no sense. That includes our resident expert here from Lightspeed. That article may be 10 years old but may be one of the most valuable have ever read. Placed a trade tonite using its principals on Fid and with very similar P/L chart the margin dropped from $6,000 to $1,360 which is still a tad too high but very happy with it.

Cheers
 
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