ninfty market margin

[markmark]

Hi
I am an options market maker, manly trade implied volatility arbitrage. Currently, I want to enter the Ninfty options marlet. Can any body tell me to buy a ninfty option (call or put), do I need to pay the full premium instantly to the broker or the exchange, or only pay a small portion of the premium for margin and the full premium will be paid on the expiry day. In most of the exchanges, we only pay margin for buying option.

 

[SavantGarde]

Hi
I am an options market maker, manly trade implied volatility arbitrage. Currently, I want to enter the Ninfty options marlet. Can any body tell me to buy a ninfty option (call or put), do I need to pay the full premium instantly to the broker or the exchange, or only pay a small portion of the premium for margin and the full premium will be paid on the expiry day. In most of the exchanges, we only pay margin for buying option.

All Option Buying needs to be paid in full on Indian Exchanges....!!!
By the way it is not Ninfty it is NIFTY...!!!
Writing options one is required to keep 1 Future Lot Margin... due to VaR....!!!

SG

 

[markmark]

So to buy a deep in the money call, it will need a lot of margin. However, to buy a future, only need 15-20% of the value of the future.

To hold a big portfolio of options including long and short different strikes of options. Since premium needed to be paid in full, will the portfolio need a lot of margin although span is used?

 

[SavantGarde]

So to buy a deep in the money call, it will need a lot of margin. However, to buy a future, only need 15-20% of the value of the future.

To hold a big portfolio of options including long and short different strikes of options. Since premium needed to be paid in full, will the portfolio need a lot of margin although span is used?

Well if you are into making market... then you should know how to go about it.... by financing a second leg from premium collected from writing....and you can have as big a portfolio as you want...!!!

SG

 

[DanPickUp]

Deleted as I made a joke which was a bit hard for the one it belongs to.

 

[markmark]

To sell an option, do we collect the whole premium( less margin)?

 

[markmark]

Let say I bought a 4500c for 640 and sold a 4700p for 1.80. How can the 1.80 premium can finance the 640 premium? Of course, hedged with selling futures.
I hope Danpickup can understand.

 

[SavantGarde]

Let say I bought a 4500c for 640 and sold a 4700p for 1.80. How can the 1.80 premium can finance the 640 premium? Of course, hedged with selling futures.
I hope Danpickup can understand.

Well what I said...is one can..if you pay enough attention to the chart....and why would anybody want to write at 1.80 and buy at 640...are you sure you are a Market Maker....

Also if you are not used to Option segment on the Indian exchanges... let me tell you it is an extremely distorted market and is not even 10 percent of the U.S. markets.... basically tons of rules to help the Big guys... !!!

 

[markmark]

I am sorry to tell you, you really do not understand how a market maker work.
We do not play direction, if you look at my question again, I said hedged with futures, need to sell about 0.9 future to make it delta neutral. We look mostly the implied volatiliy IV of each strike call and put individually in our program. For my example, the IV of 4500c is much cheaper than the IV of 4700p. So I bought 4500c and sold 4700p. For a certain strike call or put is the same to us after hedged.
That is why I worry about the margin for full premium paid.

SG, I hope that you understand me.I know I have a lot to learn from you. And please feel free to ask me anything about market making.

 

[SavantGarde]

I am sorry to tell you, you really do not understand how a market maker work.
We do not play direction, if you look at my question again, I said hedged with futures, need to sell about 0.9 future to make it delta neutral. We look mostly the implied volatiliy IV of each strike call and put individually in our program. For my example, the IV of 4500c is much cheaper than the IV of 4700p. So I bought 4500c and sold 4700p. For a certain strike call or put is the same to us after hedged.
That is why I worry about the margin for full premium paid.

SG, I hope that you understand me.I know I have a lot to learn from you. And please feel free to ask me anything about market making.

Think I have made it very clear as far as Writing options is concerned .... please read the post where I have mentioned financing a protective leg from Premium collected on writing.....in simple language it means you get the premium when you write...!!!