- Margin Requirements
- Margin Requirements Manual
- Margin Calculator
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- Continue Reading...
- Buying Straddles into Earnings
- Writing Puts to Purchase Stocks
- What are Binary Options and How to Trade Them?
- Investing in Growth Stocks using LEAPSÂ® options
- Effect of Dividends on Option Pricing
- Bull Call Spread: An Alternative to the Covered Call
- Dividend Capture using Covered Calls
- Leverage using Calls, Not Margin Calls
- Day Trading using Options
- TD Ameritrade
- What is the Put Call Ratio and How to Use It
- Understanding Put-Call Parity
- Understanding the Greeks
- Valuing Common Stock using Discounted Cash Flow Analysis
- What is Lot Size & Margin Requirements in Option Trading
Home / Stock Option Basics
In options trading, "margin" also refers to the cash or securities required to be deposited by an option writer with his brokerage firm as collateral for the writer's obligation to buy or sell the underlying security, or in the case of cash-settled options to pay the cash settlement amount, in the event that the option gets assigned.
Margin requirements for option writers are complicated and not the same for each type of underlying security.
They are subject to change and can vary from brokerage firm to brokerage firm. As they have significant impact to the risk/reward profiles of each trade, writers of options (whether they be calls or puts alone or as part of multiple position strategies such as spreads, straddles or strangles) should determine the applicable margin requirements from their brokerage firms and be sure that they are able to meet those requirements in case the market turns against them.
Margin Requirements Manual
A reference manual to the margins requirements of various options strategies has been published by CBOE and is available here.
Also provided by CBOE is this useful online tool that calculates the exact margin requirements for a particular trade.
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Buying Straddles into Earnings
Buying straddles is a great way to play earnings.
Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable.
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Effect of Dividends on Option Pricing
Cash dividends issued by stocks have big impact on their option prices.
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Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator.... [Read on...]
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Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in 1969.
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