How should I allocate my money?
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| futures, or other derivates trading margin account |
Margin trading conditions
Let's say that I have a $100K account with 20% leverage.
This means I have a buying power of 500K (am I right?).
The question is if I should risk 50K (50% of my capital) or 250K (50% of my buying power).
For example:
I sold 10 contracts of SPY 336 put. My platform (IBKR) says that my initial margin is $343 and my maintenance margin is $301.
But I know that if I get assigned, I will need to buy $336K worth of SPY... What happens then?...
This means I have a buying power of 500K (am I right?).
[5] states that 20% leverage allows not more than 5x buying power. (Not Financial Advice)
The question is if I should risk 50K (50% of my capital) or 250K (50% of my buying power).
It makes sense to use paper trading account at the beginning.
But I know that if I get assigned, I will need to buy $336K worth of SPY... What happens then?...
- if the put options is ITM(In The Money, its price is higher than the actual equity price), amount of loss for price change should be paid
- [6] describes Margin Call, when current portfolio value is less than maintenance margin (or some other minimum required threshold);
- [6] also mentions that any funds borrowed usually have interest rate to be paid as well
IBKR claims to visualize margin requirements before placing a configured order. [1]
There're 2 pages with a detailed breakdown on options contracts margin. [2], [3]
As of leverage - essentially it implies some margin requirements. IBKR documentation mostly operates with margin term. So explicit leverage perhaps is up to you to estimate. There's a link below from investopedia about leverage vs margin. [4]
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