administration:administration_long_option_premium

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administration:administration_long_option_premium [2025/01/03 13:06] – robadministration:administration_long_option_premium [2025/01/03 13:07] (current) – rob
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 ====== Long Option Premium ====== ====== Long Option Premium ======
  
-T4 has added a new feature for risk management that incorporates option premium for available cash purposes. This feature only applies to accounts in byPortfolio mode, which is aimed at providing the most accurate margin for a portfolio. One downfall to this goal is that it ignores the real world cost of long option premium. In order to better protect the trader and the FCM, we've implemented an optional extra risk parameter that adds option premium.+We have added a new feature for risk management that incorporates option premium for available cash purposes. This feature only applies to accounts in byPortfolio mode, which is aimed at providing the most accurate margin for a portfolio. One downfall to this goal is that it ignores the real world cost of long option premium. In order to better protect the trader and the FCM, we've implemented an optional extra risk parameter that adds option premium.
  
 When enabled, the account will still have a SPAN-like margin calculation for its portfolio that will take away buying power for the account, but it will also have total option premium removed from buying power. For example, if an account is long 1 deep in-the-money call it will have a margin requirement roughly equal to that of the underlying future, but the capital required to cover the premium might be substantially higher. With this new setting enabled, we would reduce the account's buying power by the margin required and by the option premium required. In contrast, if they account is short 1 deep in-the-money call it will have a margin requirement roughly equal to that of the underlying future, but there would not be a separate capital requirement to sell the option, so it would not incur an additional hit to buying power. More complex collections of long and short options will operate based on the total premium value. If the sum of premium paid and collected is a debit (net long premium) then the buying power will be reduced by that net value in addition to the calculated margin requirement. If the sum of premium paid and collected is a credit (net short premium) then the buying power will only be reduced by the calculated margin requirement. When enabled, the account will still have a SPAN-like margin calculation for its portfolio that will take away buying power for the account, but it will also have total option premium removed from buying power. For example, if an account is long 1 deep in-the-money call it will have a margin requirement roughly equal to that of the underlying future, but the capital required to cover the premium might be substantially higher. With this new setting enabled, we would reduce the account's buying power by the margin required and by the option premium required. In contrast, if they account is short 1 deep in-the-money call it will have a margin requirement roughly equal to that of the underlying future, but there would not be a separate capital requirement to sell the option, so it would not incur an additional hit to buying power. More complex collections of long and short options will operate based on the total premium value. If the sum of premium paid and collected is a debit (net long premium) then the buying power will be reduced by that net value in addition to the calculated margin requirement. If the sum of premium paid and collected is a credit (net short premium) then the buying power will only be reduced by the calculated margin requirement.
  • administration/administration_long_option_premium.1735909612.txt.gz
  • Last modified: 2025/01/03 13:06
  • by rob