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