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| administration:administration_risk_breakdown [2020/09/18 16:34] – [Explanation of byPortfolio Mode] rob | administration:administration_risk_breakdown [2025/01/03 13:09] (current) – rob | ||
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| ====== Position Limits ====== | ====== Position Limits ====== | ||
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| ===== Explanation of byMarket Mode ===== | ===== Explanation of byMarket Mode ===== | ||
| - | 1. Futures: Margin is applied to each market as it is traded. Outrights will have outright margin rates applied and spreads will have spread margin rates applied. Separate markets that would qualify for spread margin rates but were traded as outrights will still use outright margin rates. Offsetting spread and outright positions will not be offset in this mode. If an account enters a spread via the legs and flattens the position via the legs, the account will be charged spread margin for the entry and independent outright margin for the exit, even though the position should be flat. Accounts in this mode should enter and exit positions in a consistent manner (spread in, spread out or leg in, leg out) or be moved to a different account mode. | + | * **Futures:** Margin is applied to each market as it is traded. Outrights will have outright margin rates applied and spreads will have spread margin rates applied. Separate markets that would qualify for spread margin rates but were traded as outrights will still use outright margin rates. Offsetting spread and outright positions will not be offset in this mode. If an account enters a spread via the legs and flattens the position via the legs, the account will be charged spread margin for the entry and independent outright margin for the exit, even though the position should be flat. Accounts in this mode should enter and exit positions in a consistent manner (spread in, spread out or leg in, leg out) or be moved to a different account mode. |
| - | 2. Options: Margin is applied to short option positions while Premium is used for long option positions. P&L will affect the account’s available cash for winning long options and losing short options only. Negative P&L on long options and positive P&L on short options are ignored until the positions are closed. As with futures, spread margin rates are only applied when option spreads are traded as spreads. | + | * **Options:** Margin is applied to short option positions while Premium is used for long option positions. P&L will affect the account’s available cash for winning long options and losing short options only. Negative P&L on long options and positive P&L on short options are ignored until the positions are closed. As with futures, spread margin rates are only applied when option spreads are traded as spreads. |
| ===== Explanation of byContract Mode ===== | ===== Explanation of byContract Mode ===== | ||
| - | 1. Futures: All positions are viewed as outrights on the front end, but the back end looks for all possible ways to arrange those outrights into spreads. Spread margin rates are applied to outright legs that can pair with other outright legs while outright margin rates are applied to any remaining unpaired outright positions. | + | * **Futures:** All positions are viewed as outrights on the front end, but the back end looks for all possible ways to arrange those outrights into spreads. Spread margin rates are applied to outright legs that can pair with other outright legs while outright margin rates are applied to any remaining unpaired outright positions. |
| - | 2. Options: The same as options in byMarket Mode except that spread margin rates will be applied to option legs that can be combined to form basic option spreads (verticals, strangles, and straddles). | + | * **Options:** The same as options in byMarket Mode except that spread margin rates will be applied to option legs that can be combined to form basic option spreads (verticals, strangles, and straddles). |
| ===== Explanation of byAccount Mode ===== | ===== Explanation of byAccount Mode ===== | ||
| - | 1. Futures and Options: All positions are viewed as outrights on the front end, but the back end looks for all possible ways to arrange those outrights into spreads. Spread margin rates are applied to outright legs that can pair with other outright legs in the following spreads: futures calendars, long futures to long puts or short calls (1:2 ratio, same expiration), | + | * **Futures and Options:** All positions are viewed as outrights on the front end, but the back end looks for all possible ways to arrange those outrights into spreads. Spread margin rates are applied to outright legs that can pair with other outright legs in the following spreads: futures calendars, long futures to long puts or short calls (1:2 ratio, same expiration), |
| ===== Explanation of byAccount Day Mode ===== | ===== Explanation of byAccount Day Mode ===== | ||
| - | Identical to byAccount Mode except that only current day positions are considered. Any positions from previous trading sessions are ignored. | + | * Identical to byAccount Mode except that only current day positions are considered. |
| + | * Any positions from previous trading sessions are ignored. | ||
| ===== Explanation of byPortfolio Mode ===== | ===== Explanation of byPortfolio Mode ===== | ||
| - | 1. The entire position is processed through a matrix of stress tests to determine how much margin is required for the account as a whole. This is designed to produce values very similar to SPAN and is by far the best system for determination of margin that we offer. | + | * The entire position is processed through a matrix of stress tests to determine how much margin is required for the account as a whole. |
| + | * This is designed to produce values very similar to SPAN and is by far the best system for the determination of margin that we offer. | ||
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| ===== Explanation of byMarket Mode ===== | ===== Explanation of byMarket Mode ===== | ||
| - | 1. Allows a nearly unlimited position to be entered. | + | * Allows a nearly unlimited position to be entered. |
| - | 2. Positions entered via outrights and exited via legs will not offset. | + | |
| - | 3. Spread margin is only applied when spreads are traded as spreads. | + | |
| - | 4. Option spread margin is imperfect as it does not account for the delta of the spread. | + | |
| - | 5. Outright option margin is imperfect as it is a flat rate, regardless of delta. | + | |
| ===== Explanation of byContract Mode ===== | ===== Explanation of byContract Mode ===== | ||
| - | 1. Position limits are hit by the total number of contracts, regardless of buy or sell side. | + | * Position limits are hit by the total number of contracts, regardless of buy or sell side. |
| - | 2. Spread margin is not applied to futures vs options. | + | |
| - | 3. Option spread margin is imperfect as it does not account for the delta of the spread. | + | |
| - | 4. Outright option margin is imperfect as it is a flat rate, regardless of delta. | + | |
| ===== Explanation of byAccount Mode ===== | ===== Explanation of byAccount Mode ===== | ||
| * Futures vs options and option vs option spread margin are imperfect as they do not account for the delta of the spreads. | * Futures vs options and option vs option spread margin are imperfect as they do not account for the delta of the spreads. | ||