Funds Allocation Minimum
The minimum amount that is recommended in trying any trading system is an
amount that will at least cover brokerage commissions and subscription fees. It
is difficult to have a straightforward answer on this amount when it comes to an
uncovered options trading system.
Margin = (QQQ Price * 0.25 + Options Price - (asp" title=""> Price - Strike)) * 100
In May, 2009, QQQ traded at $34 per share. If we assume that selected QQQ put options are $2 out of the money options (strike = $32) and they cost $1, then the margin, according to the formula above, would be
Margin = (34 * 0.25 + 1 - (34 - 32)) * 100 = $750 per contract
In April, 2010, QQQ traded at $48 per share. By following the same strategy and selecting $2 out of the money options (strike price = $46) which cost $1 (the same as in the example above), we receive a different margin:
Margin = (48 * 0.25 + 1 - (48-46)) * 100 = $1,100 per contract
As you can see, a similar strategy was used to select options for trading in
both examples above. However, in 2010, the margin was almost 1.5 times higher than in 2009.
One single winning trade
DISCLAIMER: THIS INFORMATION IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE ANY FINANCIAL ADVICE. RISK IS INVOLVED IN ALL STYLES OF MONEY MANAGEMENT. Uncovered options trading involves greater risk than stock trading. You absolutely must make your own decisions before acting on any information obtained from this Website.
The return results represented on the web site are based on the premium received for the selling options short and do not reflect margin. It is recommended to contact your broker about margin requirements on uncovered options trading before using any information on this web site. Use our "Trade Calculator" to recalculate our past performance in relation to the margin requirements, brokerage commissions and other trading related expenses. Past performance is not indicative of future results.
Risk Statement: Naked options trading is very risky,
many people lose money trading and losses can exceed the amount invested.
QQQ: Trading signals for QQQ options.