I've read posts where people like the idea of buying a LEAP (instead of the underlying stock) as their protection when shorting a near-term call. The justification of this is usually that the LEAP ties up less capital.
But what about Portfolio Margin accounts? Is that still true?
The CBOE portfolio margin calculator is "experiencing technical difficulties" right now so I can't enter the positions to check, but I'm curious if anyone knows the PM margin requirements for these 2 pairs of trades:
(1) covered call
long 100 shares of a $100 stock
short 1 near month call on same stock with strike 100
(2) diagonal spread
long 1 Jan 2011 call with strike of 100 (for stock at 100)
short 1 near month call on same stock with strike 100
I believe the Reg T margin for (1) will be higher than (2), which is why people are attracted to using LEAPs. But I'm not sure the PM margin requirement is materially different in the above 2 examples. Does anyone with PM experience know?
Thanks,
MikeS
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