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Hi, I was looking about options on different S&P based products, mainly SPY, S&P index and the the eMini futures. I was trying to understand the rationale behind the lower margin for the futures options against the other products.
Can you shed some light on this, or point me to a good resource (I wasn't able to find some)?
Thanks a lot. Cheers, Cord
PS:Also I understood that when selling in the money options, the margin was much higher than the futures margin itself. Is this correct? |
Vespertilio homo est cientificus |
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weismat2
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| Total Posts: 71 |
| Joined: Jul 2007 |
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The main reason might be that the CME Clearing house can see both sides (option/future) to assess the risk for the future options - on the other products they have less information, thus they need higher margins to cope with that.
In reality the actual difference depends a lot on the portfolio-based margining from your clearer, who sees your overall positions. |
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Thanks. Are you saying that the margin has to do with the clearer's positions? I guessed it had to do with your net position and the price risk that you bear, which I thought it should be the same regarding of any S&P underlying you use.
I also guess that different liquidities should affect the calculation, but I don't know if that's a big part of the explanation. |
Vespertilio homo est cientificus |
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FDAXHunter
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| Founding Member |
| Total Posts: 8114 |
| Joined: Mar 2004 |
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The explanation is simple: They are different products, regulated by different regulators and structured under different rules.
S&P 500 Futures options are covered by the CFTC, whereas SPX and SPY options are regulated by the SEC.
The clearing houses are different and the settlement procedure is different.
You wouldn't expect SPY to work like ES, so why for the options? |
Salman Pushdie |
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