[TheOptionClub.com] New insane margins

 

Before you do any adjustment to your position, you better watch the new insane margin requirement. It could change dramatically: Here is an example taken from TOS as of close of today 7/8/210 if I buy 10 contract of the August put condor 107 102 95 90 my cost will be $840 which is my margin requirement and also my maximum loss to the down side or the upside because the legs are equidistant 5 points.             Assuming in future date before expiration I see that the SPY is going down and getting close let's say to 94 or 93. To protect the down side I go ahead and buy 10 contract 91-90 vertical put spread for $350.  By doing that I reduced my maximum risk to the downside to $190 only but I increased my maximum risk to $1190 to the upside. So in the worst case scenario I lose $1190.  By doing this ( buying the vertical spread) I created a non equidistant condor therefore my margin will increase to $5190. It used to be your margin =  your maximum risk. Now your margin requirement could exceed 4 times your maximum risk. So if you trade condors, iron condors, butterflies, check the effect on your margin requirement before you do any adjustment.   Labib Imtanes

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