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Option writing margin estimator

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WARNING: This is only a toy. Use at your own risk! No responsibility whatsoever is assumed for its correctness or suitability for any given purpose. You can use either decimal point or comma as decimal separator, just be sure not to use thousand separators.

Quantity
Strike $
Spot price $
Expiration date
(yyyy/mm/dd)
Volatility
%/year
Interest rate
%/year
Confidence
in Sigmas
Initial margin $

CallsPuts
Premium
Total premium
Total margin
Variation margin
Return on Margin

Instructions

It's easy. Just fill the option parameters and see the table of results. Premiums, initial margins and variation margins will be estimated for calls and puts.

Quantity: how many options you plan to write. Default value is 100, it is a convenience to yield margin value for your actual lot.

Strike: the strike of the option you is going to sell.

Spot price: the current price of the underlying asset (stock or commodity).

Expiration date: the name says it all.

Volatility: It is the volatility of the underlying asset.

Interest rate: This is used to calculate the Black-Scholes value of calls and puts.

Sigma (confidence): This is the "strength" of the margin, that is, how much variation in underlying asset it will protect against. This protection is commonly measured in standard deviations, or sigmas, and it is different from market to market and from broker to broker. The bigger the sigma, the bigger the protection and the bigger required margins will be. You will need to do some trial-and-error to get a reasonable estimation of your broker's sigma.

Initial margin: if you have already written the options, and you want to know how much additional margin will be required given current market (or perhaps some margin will be given back to your account), fill the value here. Otherwise, leave it at zero, and calculator will understand that you want to calculate initial margin.

The result fields are:

Premium: The Black-Scholes value of the option. Try to tweak the volatility until this value is very near the market (real) price of the option.

Total premium: Option premium multiplied by quantity. This should be near the value you have received, or expects to receive, upon writing the option lot.

Total margin: This is the full margin requirements for the given parameters.

Variation margin: If you have filled the initial margin field, it means that you have already paid the initial margin, and then page calculates the variation margin, which may be positive (you will get a margin call) or negative (you get money back from clearing house).

NOTE: actual margin calculations like CM/TIMS are proprietary and I don't know how they work. This page is a mere usage of statistics laws to approximate margin calculation. On top of that, some clearing houses and brokers impose additional percentages and/or fixed values over "normal" margin, and our estimations may be completely off.

Enjoy :)

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