Barb: I was going to ask you in a privet message some more questions
about margins, being you were so good to clear up that day trading
no margin cost.
I went to Waterhouse office and talked with a broker and puuting it
to gether this is what I sort of picture now.
I use to play options a lot and still look at them but have
gotten relutent to play them; and I trade Spiders a lot now.
See how many flaws you find in my thinking.
When I talked face to face with the broker the other day
one thing I was trying to get clear was exactly how my margin worked.
I never used it much in the past as I've been conservative about
that, but as my skill has come up I felt short term margin may not
be so bad. ( thanks to you I know I can day trade on margin at No Fee )
My shorts go into margin and are marked to book once a week
at Fridays close if in the red it just comes out of my cash
if in black it goes in the cash account, there is no charge on
the margin in my short account, just the long account.
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Now here is the rub on options when I'm trading I only have
to have 50% in my cash account of what my margin account is
that based on cash and equity, 10K will let me margin 20K
for a total of 30k buying power from the get go, but I pay rates
if the 20K is long, ( not if it's short ) So 10K long short
& 20K I'm not paying margin rates, I tend to favor to use the short side for any margin ( well the way they have it set that's the way the shorts seem to go anyway no matter if I say cash account.
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The rub with options is that They are not counted as equity,
hence my margin leverage is reduced. If I'm holding calls or
puts for X$ , then my margin ability is reduced 2x$ ,
At least that's the understanding I got from the broker,
and to me what ever X I'm holding in options, reduces my
ability to short 2x times that. And also takes from what
I have to go on a long trade with ( the long is counted as
equity the options are not, so when it comes to bottom
line trading power every $ in options reduces my raw power 3x.
I think tahts a side of options very few people look at.
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I forgot to ask him about the equity maintained if
I sell covered calls , I know that the call money goes into my
account and I can use it, but I'm not sure if the stock I sold
them on can still be used as equity towards margin .
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In spite of the above if MSFT will stop falling I see a nice
spread that I happened to look at a week ago,
Today it got nicer buying the 00 $60 ( was looking at the $50s)
but 60s look better now, then selling the 100s after she starts
up a tad. Still what I tie up in that is money ( and equity )
that I can't trade or ( leverage for free on the short side ).
And there is just about always one Spider or another going the
opposite of the others .
If I can catch one going up and jump it, while double jumping
the dropper I get the leverage for free.
IT seems to me,
Options cost me money I could use going long and 2x that for
going short, before I even figure in the premo on them that's
3x my buying power shot for every $ I have tied up in options.
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Do you know about the deal on useing a stock you have sold
calls on as equity towards the margin percent. ?
Did I understand it right from that broker that if I have
say 10k long I can short 20K of something ? is that 10K long
good to long another 20K in margin ? ( like it would put me 30K
long ) ? thats what I heard but can't make myself belive it
with out talking to some one who has done it.
I did talk to him face to face but just want to confirm it
as I feel I may not have heard him right.
If the above is true then I doubt I'll ever buy another
option as I see too many Mo Mo trades ( that don't make a
lot but they are fast..and if I can jack em up with margin
I don't think I want money tied up in options , as I'm sure
I got that part right , options are not considered equity
hence you can't margin on them.
Thanx
jim |
