What Does Portfolio Margining Mean For You - Part Two
....Continued From Part One
Portfolio Margining & Index Options
In part one, we looked at an example of how portfolio margining could benefit your equity options positions. That example outlined the substantial savings that portfolio margining could generate for a married put position.
In part two, we are examining the benefits that portfolio margin can have on your index option positions.
Example #2 - Index Straddle
Long OEX Straddle With OEX @ $694.38
Long 1,000 OEX OCT 700 Calls @ $16.80
Long 1,000 OEX OCT 700 Puts @ $20.00
Traditional Margin Requirement:
100% of call and put premium= $3,680,000
New Portfolio Margin Requirement:
Gains and losses from the straddle position are calculated using both up 6% and down 8% market movements. Since these movements will only generate gains for the position, portfolio margin only requires the position minimum deposit of $75,000.
Estimated Savings Under Portfolio Margin = $3,605,000
Note: This margin amount indicates the minimum required under existing SEC rules. The prime broker may require additional margin per the firmís own guidelines"
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