Margining Requirements for Index Options
Determination of Margin Requirements
Margin for short index option =
Option premium + Maximum [Margin “A” – Out-of-the-money, Margin “B”]
Margin “A” = Price of the underlying index × Value per index point × Risk coefficient
The value obtained by this formula is rounded upward to the nearest NT$1,000
Margin “B” = Margin “A” × 0.5, rounded up to the nearest NT$1,000
Out-of-the-money for short call = Maximum (strike price x strike price multiple - value of underlying index, 0)
Out-of-the-money for short put = Maximum (value of underlying index - strike price × strike price multiple, 0)
The calculation of the risk coefficient of margins for index option contracts is based on the price movements of the underlying index within a certain period, anti-procyclicality and other possible factors with at least a 99 percent confidence interval to cover two-day premium price variation.
Margin requirements for various index options trading strategies
|Trading Strategy||Position Description||Margin Requirements||Remarks|
|Single Position||Long Put or Long Call||None||Pay only the premium|
| Short Put
|100% of option market value + max(A - out-of-the-money amount, B)||
|Straddle or Strangle Positions||Short Call and Short Put||max(margin requirement for call, margin requirement for put) + the option market value of call or put (depending on which one's margin requirement is less)＋short straddle/strangle additional margin(C-value)||
|Combinations of Options and Futures Positions||Long futures and short call or Short futures and short put||Margin requirement of the futures position and the option market value||
|Conversion and Reverse Conversion||Conversion:
Long Put,Short Call
|No margin required on long position.
The margin on short position is calculated the same way as that on a short call or short put.
Long call,Short Put