Credit spreads with Commsec

[builder2818]

Is anyone here trading credit spreads with comsec and how have you found them?

 

[jackson8]

Is anyone here trading credit spreads with comsec and how have you found them?

hi
have been trading with commsec with spreads
need to enter each leg individually and some say that other brokers have cheaper fees ex.IB and better platforms
probably depends on what level of trader you are as to whats better

for me comsecc ok as its a good learning experience to have to trade seperate legs helps to understand how it all works. but of course paying two lots of commission is bit of a killer.

trade desk can take a while to get through to at times if you need to contact them. so never rely on them for placeing trades i only always do online.

you need to be aware of the margin requirements
double what the asx margin calculator comes up with

 

[builder2818]

If i'm doing a bull put spread, is my only margin the difference between the strike prices that I sold and bought the PUT for? Does comsec still require double this or because I have to do each leg separately do they still debit and credit your account daily with the margins?

 

[jackson8]

If i'm doing a bull put spread, is my only margin the difference between the strike prices that I sold and bought the PUT for? Does comsec still require double this or because I have to do each leg separately do they still debit and credit your account daily with the margins?

hi you will find it is more that the difference between strike prices as asx adds in additional risk margin then comsecc doubles the figure
so aprox. a $1 stike difference will require comsecc margin of aprox and i do say aprox! $1500.

margins are calculated and debited or credited daily to your cca account

here is link to asx margin calc.


http://www.asx.com.au/opc/OpcLead?issSB=266

if you need help with it just ask

 

[builder2818]

SO, essentially your bought PUT doesn't account for anything when determining the amount of margin you have to pay? Do they just calculate what the margin is for the sold PUT side of the leg?

I have written PUTs with them before but thought I could reduce my margin requirements by buying a PUT for protection.

 

[jackson8]

SO, essentially your bought PUT doesn't account for anything when determining the amount of margin you have to pay? Do they just calculate what the margin is for the sold PUT side of the leg?

I have written PUTs with them before but thought I could reduce my margin requirements by buying a PUT for protection.

the bought put reduces the margin required as it acts as an insurance policy

if you sold a naked put your margin requirements could be up around the $3700 for a $14.00 sold strike and as the sp drops that figure will grow

the bought put contains the damadge and reduces your overall margin requirement

 

[jackson8]

SO, essentially your bought PUT doesn't account for anything when determining the amount of margin you have to pay? Do they just calculate what the margin is for the sold PUT side of the leg?

I have written PUTs with them before but thought I could reduce my margin requirements by buying a PUT for protection.

as an example
a may naked put on sto strike $15. req. aprox margin $2938 by comsec for 1 contract

a spread of $15 sold and $14 bought reduces that margin to $1200

further to that if the sp falls to $15 margin on naked $3700 whereas spread margin will remain fairly constant at $1100-1200

 

[builder2818]

Thanks for the help Jackson, I sort of understand the options calculator but not for doing spreads.

Say for example I want to:
sell 40 XYZ May PUT $20.00 @ $1.695
buy 40 XYZ May PUT $19.50 @ $1.320

I was assuming my total margin would be:
20-19.50 = 0.5 - ($1.695 - $1.320) = 0.125
0.125 x 40000 = $5000

Would comsec add to this?

 

[jackson8]

Thanks for the help Jackson, I sort of understand the options calculator but not for doing spreads.

Say for example I want to:
sell 40 XYZ May PUT $20.00 @ $1.695
buy 40 XYZ May PUT $19.50 @ $1.320

I was assuming my total margin would be:
20-19.50 = 0.5 - ($1.695 - $1.320) = 0.125
0.125 x 40000 = $5000

Would comsec add to this?

the asx margin calc is quite complicated computation
but according to the calculator on asx your margin req by comsec would be aprox $42000 or $1050 per contract having used anz as an example

reflects what i said earlier about risk margin being added in by both asx and commsec
to add your method of working out the margin is incorrect

 

[builder2818]

I can't see why you would need to come up with such a high margin when your bought PUT covers most of the margin.

 

[jackson8]

i dont think that there is an off the top of the head method of working out the margins as month of exp and position of spread to price of the underlying are all going to play a part in the process as well as diff between strikes.

thats why i always use asx calc. and even then i find some variances from day to day between them and commsec

 

[cutz]

G'Day Builder,

This document explains how margins are worked out http://www.asx.com.au/markets/pdf/UnderstandingMargins.pdf , the calculator site jackson8 listed actually can demonstrate the reducing margin requirements as you add long positions, ie start with a short position (minus symbol in front of no. of contracts) calculate margin then add a long position and you will find margin requirements will reduce, double the figure and this is what commsec uses.

 

[builder2818]

Thanks Cutz. Do I need to look at the first table under the options details (Margin Table) or the one under that (Theoretical Total Value of the number of option contracts) to get the margin price?

 

[jackson8]

hi builder

i hope you dont mind but have borrowed this from other thread where you voiced some concerns over margin

quote
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? quote

i have not dealt with other brokers but from my understanding they all rely on the asx for initial margin calculations
what they choose to do after that within their own policies may differ from broker to broker.
the requirements may seem a little harsh but the asx have specific regulations in place to assure the integrity of the options market and the high financial risks associated with trading it.

margin requirements can be a stumbling block to placing larger trades but at the same time act as a failsafe to some degree

 

[jackson8]

Thanks Cutz. Do I need to look at the first table under the options details (Margin Table) or the one under that (Theoretical Total Value of the number of option contracts) to get the margin price?

after you have entered all positions click on portfolio tab and that will bring up margin under
as an ex.

Margins payable on all positions:

ASX Code Underlying Abbrev Name Premium Margin Risk Down Margin Risk Up Margin Chosen Risk Margin Total Margin
ANZ ANZ BANKING GRP LTD -17200 -24736 15310 -24736 -41936
Total cash margin -17200 -24736 -41936






you can then add in colatoral but remember to either enter in the double no. of contracts for both legs to get comsec margin or just double the end result . both will acheive the same

 

[cutz]

Thanks Cutz. Do I need to look at the first table under the options details (Margin Table) or the one under that (Theoretical Total Value of the number of option contracts) to get the margin price?

Hi Builder,

You need to look at the margin table, the first block show total margin payable (premium + risk), the blocks below show how the margin requirements change as the underlying changes in price ( assuming all other inputs remain the same).

For further info refer to the explanations at the bottom of the ASX margin page.

 

[builder2818]

I posted that a few weeks ago because I wanted to know about selling naked PUTs. I don't want to do this anymore and more interested in spreads. I thought that I could gain a bigger exposure to a stock while realising my maximum profit and risk.

If margin requirements differ greatly from what I calculated them to be, spreads might not be suited to me. I know there are brokers out there who can lend you 100% of the cost to purchase shares to write covered calls on as long as you have the bought PUT in place for protection. I know the margin requirements I calculated for spreads may be available but comsec brokerage rates obviously would favour me in the event I got exercised. I guess you get what you pay for huh?

 

[builder2818]

You need to look at the margin table, the first block show total margin payable (premium + risk), the blocks below show how the margin requirements change as the underlying changes in price ( assuming all other inputs remain the same).

For further info refer to the explanations at the bottom of the ASX margin page.

So should I assume the total margin payable is what comsec will double to take off me for placing the trade. Do I then subtract the premium received to get the actual amount?

 

[jackson8]

So should I assume the total margin payable is what comsec will double to take off me for placing the trade. Do I then subtract the premium received to get the actual amount?

yes to my understanding that is correct
just keep in mind that as the underlying flutuates from day to day the margin req wil be adjusted to debit more or credit depending which way the sp moves

 

[cutz]

So should I assume the total margin payable is what comsec will double to take off me for placing the trade. Do I then subtract the premium received to get the actual amount?

Correct, if you're using cash only as margin, so in effect commsec keeps the net premium then deducts the outstanding amount from your bank account (to submit to the OCH).