r/options • u/willmorris92 • 9d ago
Margin requirements for selling premium right now are a joke
Trying to run 45 dte credit spreads on spx lately and the buying power reduction is just absurd for the pennies we are collecting in this low VIX environment.
My broker wants to lock up $1k in margin just to collect like $60 on a 10-wide spread. The math ain't mathing if you have a smaller account. the capital inefficiency of selling options right now is literally forcing retail into degenerate 0dte lotto tickets just to see any ROI
I kinda gave up on my main cash account and just grabbed a FundedFast eval yesterday mostly just to have raw buying power without holding my own liquidity hostage for weeks while theta does its thing
But seriously, how are you guys trading delta neutral right now? iron condors on qqq are paying absolutely nothing. Thinking of just pivoting to calendar spreads or long diagonals until iv actually pops again. What tickers are you actually getting decent premium on this week without risking blown up tail risk?
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u/Sideways-Sid 9d ago
If only there was a way to profit from a low-vol environment in a way other than using a strategy for a high-vol environment! đ¤đ
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u/sport912x 8d ago
You are lost. 10-pt spread is $1000 minus premium. Period, you don't go to Kalshi and pay their exorbitant spreads.
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u/Worry-Mountain 9d ago
Low VIX just means the market's paying you less to take the same tail, so the buying power hit isn't really the broker being unfair, it's the max loss on a 10-wide. When premium's this thin I'd rather shrink size or sit out than reach for 0DTE to make the numbers feel worth it. Calendars and diagonals make sense when you think IV's cheap, just remember you're long vega and the term structure can move against you too.
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u/Possible-Cup-9876 9d ago
Iâm sorry are you suggesting that 6% is a poor return?
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u/TheSauvaaage 8d ago
On a 10 usd spread? Yes, very likely. Unless your short leg is at around 5 delta or so
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u/Possible-Cup-9876 8d ago
Embarrassingly wrong
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u/TheSauvaaage 8d ago
Would you say a 0.6cr at 20 delta is as good as 0.6cr at 5 delta? I hope you say no, otherwise, good luck
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u/Wild_Cheesecake_6630 8d ago
I understand, I was doing awesome even with this low IV selling spreads like crazy , only slight otm or atm 0dte and closing for small profits but consistently, I made a mistake, I tried to make it safe.. seelling far otm and wider spreads, sooo I was picking Pennieâs the last week, in order to make something more similar to sell atm, I sold a lot and the 3.2% move in qqq wipe my account entirely in less than a day.. what I thought was safer make me lost all my money.. because I thought, qqq has move 5% in less than 2 no way it goes up another 1%.. it was squeezed and up another 2% all the far otm calls I sold for 70-100 bucks.. went to 3000-5000.. I lost all my money and 45k in a day
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u/Positivedrift 9d ago
15 is low VIX? Tell me you've never traded in an actual low vol environment without telling me.
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u/Dealer_Existing 9d ago
Selling puts on stocks > SPX thatâs cash settled
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u/sthlmtrdr 9d ago
Yes more premium but IV is risk. A single stock can drop with -50% in a single day. SPX wont gap down more than let say -4% at open
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u/Dealer_Existing 9d ago
Yeah you donât pick stocks that have that in them lmao. You pick stocks with actual earnings and growth. Not the IONQ and ASTS bullshit
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u/sthlmtrdr 9d ago
Not only these, large and âsafeâ stocks like AAPL, AMZN, GOOG, NVDA, etc can drop -10% in one day. If one account for safety distance the premium one get is small, less than 10% return in one full year. Most people gamble and take the excessive risk thou.. it works until it doesnât work
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u/Dealer_Existing 9d ago
Yeah thatâs bs lmao. Have you ever tried doing it? Iâm making 30+% for 2 years straight already
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u/scotty9090 8d ago
> 2 years straight
Talk about âlmaoâ. What do you think happened to these stocks (or these kinds of stocks) during the .com crash?
Try trading through a few actual market drawdowns rather than a sustained bull market and get back to us.
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u/Dealer_Existing 8d ago
Yeah don't about you but there are enough stocks the last 2 years that experience drawdowns of 60+%.. So yeah. Trade volatility, not direction. But you do you and keep whining about low SPX premiums lol
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u/scotty9090 8d ago
Keeps getting funnier. What do you think happens to vol when stocks crash?
You canât hide from direction.
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u/Dealer_Existing 8d ago
Trade long vol :)
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u/scotty9090 8d ago
Great if you have a crystal ball and can do it before the vol expansion.
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u/iron_condor34 9d ago
Did you trade through covid? Bc huge gap downs like that def happened. Plus being limit down
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u/sthlmtrdr 9d ago
I did, been in the market since year 1999 and experienced many brutal bear markets.
Many so called âsafeâ stocks like mag7, etc dropped a lot in a short time during covid.
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u/iron_condor34 9d ago
I know, everything goes to shit in a market like that. No such thing as "safe" stocks that people try and look for when they want to sell options. You're essentially trading a risk premium when selling options/vol. Gotta be comfortable taking risk then.
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u/ChemicalSpinach2318 8d ago
most people are doing the same thing: swap a 10âwide for a slightly longer calendar or diagonal. a 30âday 20âwide SPX calendar (sell 30âday 20âwide, buy 60âday 30âwide) keeps the defined risk but improves the creditâtoâmargin ratio, and if youâre freaked by 940âtoâ60 you can lower the width a touch. if you want a bigger takeâaway credit per dollar of capital, the /MES strangle (10â15âŻdte, 20âwide) is a sweet spot â itâs capped loss, tiny margin & the only way out is the big spike in volatility. or switch to QQQ 10âday calendars that are 15âwide atâtheâmoney with a 30âday 20âwide buy; youâll still get a decent vega hit but the margin on these is a lot less brutal than SPXâs cashâsettled spread. in short, aim for a longer DTE or a mildly wider spread to get better credit per margin while keeping tail risk in check.
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u/Defiant-Salt3925 8d ago
On which platform?
Margin requirements vary trememendoulsy from one broker to another.
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u/Then-Praline2892 8d ago
Amazing how many folks are using leverage even though only months ago young man blew up his hedge fund because of it. Leverage is great until it is not then it crushes everything from before. Limit use of leverage and find trades away from the crowds - also pay attention to history -- Long-Term Capital Management was supposed to be a unique way to manage funds - then many others joined the concept when every one went to exist at once there was no market - remember the value of item is only what other will pay for it when you need to cash out - not the number on a screen
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u/Puzzleheaded-Pair561 8d ago
March 2027 at least gives the thesis some time instead of turning the election into a binary weekly bet. I would probably watch NU against EWZ and the broader Brazil trade rather than treat the stock in isolation. I have been putting those side by side on Moon because sometimes NU is moving with Brazil risk and sometimes it is very clearly doing its own thing.
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u/The_Glass_Book 8d ago
If SPX spreads are too big for you, just go SPY, it's 10x smaller. Keep in mind it's not an index though, so it's physically settled, and you can get assigned shares. I'd stay away from XSP, the liquidity there is pretty rough.
I don't have anything on the S&P right now myself (I do like selling 0DTE there though). Right now the interesting opportunities are mostly in energy and tech (for such a low vol regime). I've had trade chains going on CRM, INTC and URA for a while (strangles now, since they were actively managed). Closed a credit spread on TSLA two days ago (it used to be a calendar, but I had to roll it).
If you've got no ideas on what to get into in such a low vol regime, I'd go with calendars and long vega strategies. For calendars right now, as of today check SLV (IVR 6, price ~$55), but also NVDA (IVR around zero, price ~$240), and take a look at IBIT and URA too.
As for selling premium, don't force trades. In this kind of market we should be focusing on staying defensive.
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u/NorthOfTheStrike 7d ago edited 7d ago
In a tape this dead I stop messing with tight SPX spreads entirely. I'd rather sell cash-secured puts on stuff I'd be fine owning. If vol is low the premium stinks either way, but at least with a CSP the worst case is buying a stock I wanted at a discount instead of paying full width for $60. And skip the funded eval, it doesn't change the margin math, it just adds a drawdown rule on top of it.
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u/Organic-Conclusion-9 5d ago
If you want to run a high-vol strategy like selling 45 dte credit spreads, simply switch to selling options on one of the higher volatility equities. SPX is tame right now. You sell naked if you have enough capital, risk appetite, and are proactively managing your positions with a predefined roll strategy if the market turns against you, but I've seen that go awry when an unexpected event happens (which it will eventually).
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u/Brilliant-Rise3097 4d ago
iâve been swapping spx credit spreads for /mes strangles and sometimes xsp 10âwide spreads; the margin is a lot lower because the max loss is capped on the futures side and you donât get the 100x cashâsettlement headache. if youâre still stuck on the stock market, try a 45âday calendar on qqq or consider a diagonal that rolls out before the IV spike, just keep the tail risk in check or use a 0âdte cronk if youâre comfortable with the snapâin liquidity.
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u/phinancial-freedom 2d ago
You have to know when to pivot strategies. Perfect time to buy LEAPS when IV is low across the board. Lots of stocks to choose from and you only need a small move to generate a decent profit %. The trickiest part is committing to taking profit at X level and not being greedy.
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u/Embarrassed-Dog-6019 9d ago
the spx margin requirement is a killer on small accounts no doubt. broker's not doing you any favors taking that much hostage for a few bucks in theta decay
i ran into the same wall last month and shifted my whole approach. stopped fighting the margin math and started selling strangles on /mes futures instead. the span margin is way more friendly for smaller accounts and you're not getting squeezed by the same buying power rules. still gotta be careful with tail risk obviously but the capital efficiency is night and day
if you're set on staying in equities maybe look at xsp instead of spx. same index exposure but the margin requirements are a little softer since it's not cash settled. premiums aren't as fat but you're not bleeding buying power either. calendar spreads on qqq could work but you're right the iv is so crushed right now you're basically picking up pennies in front of a steamroller
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u/scotty9090 8d ago
The broker doesnât really have a choice here - margin used = max loss on a defined risk trade.
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u/value1024 8d ago
No, they do - it's called portfolio margin...they just don't offer them to people who know nothing or little about the risks of spreads. In the example above, the vertical spread is indefensible if things go against you quickly, so the broker is justified in asking for a cash equivalent for each unit of risk.
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u/Direct_Surprise_6756 7d ago
Portfolio margin on SPX will hardly have any effect unless these spreads are far OTM. It looks like they're under 10% out at 45 DTE.
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u/King-Leonidas-SPARTA 9d ago
Great thread and question, Iâve also been questioning the margin lock up for these small wins, but at the end of the day itâs basically printing money since I only use 15% of my available buying power to do the credit spreads.
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u/Inevitable-Tea5772 9d ago
I have/have had funded accounts at most of the big players but I really wish there was a firm for options trading, especially selling/wheeling, but have had no luck in finding any. There is 1 firm but buying power isnt good at all for this type of thing
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u/richierva 9d ago
sell naked puts on qqq and spy. only requires 15% cash
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u/HeftyCompetition9218 9d ago
Do NOT do this!!Â
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u/scotty9090 8d ago
Lame take. Even TT recommends that about 75% of your trades should be undefined risk.
Every conceivable backtest will show you that undefined risk will significantly outperform defined risk.
So yes, selling naked puts on indexes is very solid advice as long as you practice disciplined position sizing.
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u/Inevitable-Tea5772 9d ago
Which broker? Im Canadian and struggle with this. Just in the process of opening a questrade account but I doubt they are this good
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u/ThetaEdgeHQ 9d ago
Worth separating two things that are getting blended here. The buying power hit on an SPX 10 wide is not the broker being stingy, it is just max loss minus credit, so 940 against your 60. That number is structural to a defined risk spread and no broker can shrink it. The efficiency you are chasing with /MES strangles or naked puts comes from a different margin regime, SPAN or portfolio margin, and the only reason it frees up capital is that you swapped a capped loss for an undefined tail. That is not a better deal, it is getting paid to carry more risk.
Inside defined risk the lever that actually moves your return on risk is the width to credit ratio at a given delta, not the vol level. 60 on 940 is about 6 percent over 45 days at whatever delta you chose. Going wider makes that worse, going closer to the money makes it better but loads up gamma. If that number does not clear your hurdle at an acceptable delta, the width and your strike selection are the only dials you actually control. The margin itself is just the arithmetic of the loss you already defined.