Short Margin requirements, per contract
Nov05 5075 Puts 2 weeks ago;
Scan............Liquidation.....Total Margin
435.....................95........................530
Nov05 5075 Puts Now;
Scan............Liquidation.....Total Margin
975.....................555........................1530
Margin required has multiplied by almost 3 times
Dec05 5025 Puts 2 weeks ago;
Scan............Liquidation.....Total Margin
540.....................175........................715
Dec05 5025 Puts Now;
Scan............Liquidation.....Total Margin
975.....................665........................1640
Margin required has more than doubled
This following the Footsie falling 200 points in 2 weeks - is that so unusual ?
Shorting far out in time has major Vega risk, and shorting DOTM has major leverage risk. And if you combine shorting far out in time and DOTM is a recipe for disaster IMHO. I’d much rather sell 10 ATM Puts for 50, than 50 DOTM puts for 10. Merely looking at an expiry profile is not enough, you need to look at what can happen prior to expiry. In the above cases massive margin increases would probably mean forced liquidation and massive losses.
I'm not having a go Bulldozer, just pointing out (with real life examples) of how trades can go horribly wrong, occasionally.
If it's any consolation to you, I was net short Puts for October expiry, and needless to say I took a hard whack. But the difference is I understand the risks, whereas you have some way to go.
The purpose of my post ? well, I know that you won't be persauded otherwise and frankly neither do I care, but just in case anyone else decides to follow that strategy, I thought I'd highlight the risks involved, for them.
As always....
Good luck.
