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Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (1324)	4/3/2000 7:37:00 PM
From: OX	Read Replies (1) \| Respond to of 2317

I'm sure Ken can answer this much more succinctly than I can. First, there are several equivalent ways to construct butterflys. after deciding which combo you have, I would say split up the legs into the respective spreads, and compute the margins that way. keeping in mind if you have a short straddle, in general, margin is calculated using the prems collected + 20% (or 15% for indices) of the underlying. other than generalities, I still have this mental block on calculating the specifics of margin.

To: jjs_ynot who wrote (1324)	4/3/2000 8:33:00 PM
From: KFE	Respond to of 2317

Dave, Do you know how brokers compute the margin required on a Butterfly spread. In August of last year the margin requirements were changed (liberalized) on butterfly spreads to the following: Long butterfly spreads will pay in full the net debit incurred (i.e. the maximum risk). Short (credit) butterfly spreads will pay the difference between the exercise prices. Net credit received may be applied. As you know a butterfly spread is just a combination bull and bear spread. The margin rules used to be the sum of the requirements for the bull and bear spread. Check with your brokerage firm to make sure they are following the new minimum requirements. Part of the same margin rule package was the change making LEAPS 25% marginable but most firms have not allowed this yet. Regards, Ken