Chapter 34: Futures and Futures Options 671 
As a means of comparison, under the older "customer margin" option require­
ments, the requirement for a covered write was the futures margin, plus the option 
premium, less one-half the out-of-the-money amount. In the above example, assume 
the futures were at 408 and the call was trading at 8. The customer covered write 
margin would then be more than twice the SPAN requirement: 
Futures margin 
Option premium 
1/2 out-of-money amount 
$10,000 
+ 4,000 
- 1,000 
$13,000 
Obviously, one can alter the quantities in the use of the risk array quite easily. 
For example, ifhe had a ratio write oflong 3 futures and short 5 December 410 calls, 
he could easily calculate the SPAN requirement by multiplying the projected futures 
gains and losses by 3, multiplying the projected option gains and losses by 5, and 
adding the two together to obtain the total requirement. Once he had completed this 
calculation, his SPAN requirement would be the worst expected loss as projected by 
SPAN for the next trading day. 
In actual practice, the SPAN calculations are even more sophisticated: They 
take into account a certain minimum option margin (for deeply out-of-the-money 
options); they account for spreads between futures contracts on the same commodi­
ty (different expiration months); they add a delivery month charge (if you are hold­
ing a position past the first notice day); ~ they even allow for slightly reduced 
requirements for related, but different, futures spreads (T-bills versus T-bonds, for 
example). 
If you are interested in calculating SPAN margin yourself, your broker may be 
able to provide you with the software to do so. More likely, though, he will provide 
the service of calculating the SPAN margin on a position prior to your establishing it. 
The details for obtaining the SPAN margin requirements should thus be requested 
from your broker. 
PHYSICAL CURRENCY OPTIONS 
Another group oflisted options on a physical is the currency options that trade on the 
Philadelphia Stock Exchange (PHLX). In addition, there is an even larger over-the­
counter market in foreign currency options. Since the physical commodity underly­
ing the option is currency, in some sense of the word, these are cash-based options 
as well. However, the cash that the options are based in is not dollars, but rather may 
be deutsche marks, Swiss francs, British pounds, Canadian dollars, French francs, or