Beta Hedging with portfolio margin

Discussion in 'Options' started by deltaf0rce, Dec 18, 2020.

  1. deltaf0rce


    Long story short, does PM free up margin for beta Hedging? Not getting the impression that it does.
  2. ajacobson


    The only relief you'll get under PM is when you buy the individual name puts - then your risk becomes the synthetic call. What your talking about is cross margin and you won't get it in retail - although a poster here on ET said he was allowed - I'm a bit skeptical, but you can search old posts, and im that poster, I think it was this week.
    deltaf0rce likes this.
  3. deltaf0rce


    That’s annoying to a certain degree. If you want to maintain a long book and periodically short against it you should get a certain degree of relief. I am surprised to see that only indices can carry partial relief to each other.
  4. ajacobson


    Trade and clear with a bank and if your account size and character merit it - they MAY be able to make it available. Obviously, confirm it first
  5. deltaf0rce


    It crossed my mind. So if you want true cross margin, you need to drop 500k (realistically larger I’m sure) with a prime broker - not to mention incorporate as a trading business I would imagine - and lastly find somewhere that would take the arrangement.

    On the bright side with a prime broker, you can send your flow wherever you want if you can convince an account exec somewhere with good liquidity to take your business

    to be clear I am not outright disappointed on PM, I just think it’s lousy that you can’t cross margin.
  6. Robert Morse

    Robert Morse Sponsor

    Correct, the OCC/NFA only offers cross margin to self-clearing brokers. When a large bank offers this as a service, they are loaning money to the customer based on their balance sheet for Futures margin and charging interest. This is not a retail offering. I would think >$100mm on your balance sheet would be typical for this, but up to each Broker. They can't lend you money for a securities margin account beyond what is allowed by regulators.