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Fred -
I am posting this to the list as well. Usually if one person has a
question, so do others.
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Paul,
I read with interest your reply to a post on the RT discussion group. My
goal is to trade options on futures for a living as you are. If you
wouldn't mind I have a few questions regarding options. When taking a
straddle position what is the margin requirement? I know SPAN calculates
margin but I can't find a straight answer. If you could give me a
hypothetical example or, perhaps, an example from your past trades, it
would
really help I need especially to know total margin requirements,
comissions
and how you feel I should estimate risk on straddles or strangles. The
margin requirement is hardest to get. Brokers say, "just call me and I'll
give you the information". Fine, but I don't have time or desire to listen
to their sales pitch right now.
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As far as I am concerned, SPAN margins are close to impossible to
calculate. I think you can download some spread sheets from the CME or
CBOT. I have not seen software to do it. To be conservative, I just
figure the futures margin. You know it will not be more than that. The
margin on a short strangle is the same as for a short put or call.
If you don't have the outright futures margins, you can get a list from
your broker, or from the exchanges. That is assuming that your broker uses
exchange minimum margins. If you are having trouble with your broker,
switch. You spend too much money with them not to get good service. There
are plenty of them out there.
Risk is always hard to evaluate. I look at how many std deviations of the
close is from current price to strike. I also look at levels of support
and resistance.
Paul
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