ACH margins and broker margin requirements

[builder2818]

I know in the current state that the market is in that its not a good time to be writing put options. But does anyone know of a simpler way to calculate the margins that the ACH requires when writing options? I have read the 'understanding margins' book from the ASX, I understand it but when they talk about the theoretical value of an option, I don't know how they calculate what the options premium will be - they just seem to give it a value.

Also, do most brokers require you to come up with collateral to meet your margin requirements? I am with commsec and they double what ever the ACH calculates as a margin for your option. I don't like this - I have the money to purchase the stock if I was exercised but 2/3rds of it is in the form of a margin loan and I cannot draw down on this if my cash component isn't enough. Are there brokers out there that are happy enough for you to just meet your ACH margins knowing you can purchase the shares if you're exercised?

 

[jackson8]

I know in the current state that the market is in that its not a good time to be writing put options. But does anyone know of a simpler way to calculate the margins that the ACH requires when writing options? I have read the 'understanding margins' book from the ASX, I understand it but when they talk about the theoretical value of an option, I don't know how they calculate what the options premium will be - they just seem to give it a value.

Also, do most brokers require you to come up with collateral to meet your margin requirements? I am with commsec and they double what ever the ACH calculates as a margin for your option. I don't like this - I have the money to purchase the stock if I was exercised but 2/3rds of it is in the form of a margin loan and I cannot draw down on this if my cash component isn't enough. Are there brokers out there that are happy enough for you to just meet your ACH margins knowing you can purchase the shares if you're exercised?

The asx website has a online calculator the link is below
Put in your option sells but remember that a sold option has a minus in front of the no. of contracts sold

The calculation process for both the margin and an options value is quite involved and is quite a long mathematical formula

I am with comsec and I think their margin requirements are quite reasonable and I do not know of another broker that would expect any less

If you purchase a call at a higher value it will both add a little insurance in case the trade goes against you and it will also lesson the margin required

using margin loans at this point could be quite dangerous if you ask me . i only risk what i have in my pocket and only a small proportion of that at any one time


http://www.asx.com.au/opc/OpcStart?Mode=M

 

[jackson8]

If you purchase a call at a higher value it will both add a little insurance in case the trade goes against you and it will also lesson the margin required


sorry
you are talking about selling puts so therefore the above should read

if you purchase a put at a lower value it will both add a little insurance in case the trade goes against you and it will also lesson the margin required

 

[cutz]

do most brokers require you to come up with collateral to meet your margin requirements? I am with commsec and they double what ever the ACH calculates as a margin for your option. I don't like this - I have the money to purchase the stock if I was exercised but 2/3rds of it is in the form of a margin loan and I cannot draw down on this if my cash component isn't enough. Are there brokers out there that are happy enough for you to just meet your ACH margins knowing you can purchase the shares if you're exercised?

Yes that’s correct all brokers require collateral in the form of available funds, some brokers require less and some don’t allow naked short puts/calls.

Commsec requires double the OCH requirement as it probably realizes that its options clients may be on L plates, (myself included).

IMO OCH by 2 is OK for beginners, 5 grand for a BHP Mar09 25Put isn’t that bad, you did say you have the cash to cover the face value.
With my account I generally don’t like to use more than 50% available margin because it the market goes against you and you’re running your margins to the stops things can get very nasty very quickly.