Tag Archive | "double-calendar"

Double-Diagonals Have You Seeing Double (Margin)?

Thursday, June 24, 2010

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When some brokerages calculate margin on complex option spreads, they don't allow for the fact that it's impossible for an out-of-the-money bull put spread and an OTM bear call spread on the same underlying both to expire at maximum loss—so they withhold margin on both spreads independently. Options-centric brokers (like the ones who autotrade our newsletters) don't require double margin on a balanced iron condor or butterfly (i.e., where the vertical spreads are equal and all contracts have the same expiration date)…but thanks to a regulatory crack-down in the wake of the 2008 credit crisis, it's increasingly likely that any deviation from a balanced iron condor or butterfly will cost you margin on both sides…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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