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Strategies & Market Trends : Canadian Options
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To: Steve Bevington who wrote (1465)2/1/2000 2:28:00 AM
From: tyc:>   of 1599
 
And having opened the subject of straddles, a discussion of the margin requirements might be of interest.

It is my understanding that margin is charged on the side of the straddle that demands the most. The other side travels free, as it were. Now suppose the put side is in the money, and you decide to hedge by shorting stock. Theoretically, I would argue that you now have a covered put and margin should be calculated on the short stock plus the o/m call. I feel however that in practice in won't work that way. The brokerage house will want to charge margin on the in-the-money put and on the the short stock. This could gobble up margin pretty fast.

I'm just theorising, but I wonder if anyone has had any experience of this.
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