Margin requirements for a short straddle or strangle
Only margin accounts may trade a short straddle or strangle
The margin requirements for a short straddle/strangle is the greater of the two sides' short uncovered margin requirement plus the premium of the other leg.
*The premium received from the sale of the strangle may be applied to the initial margin requirement.
Example of Selling a Straddle or Strangle in a Margin Account
With the underlying at $45,
Sell to open 1 Mar 47 call at $2.10
Sell to open 1 Mar 43 put at $1.20
Mar 47-strike Call Margin Requirement
[((.20 x 45) - 2) + 2.10] x 1 x 100 = $910 ← highest margin requirement
[(.10 x 45) + 2.10] x 1 x 100 = $660
Mar 43-strike Put Margin Requirement
[((.20 x 45) - 2) + 1.20] x 1 x 100 = $820
[(.10 x 43) + 1.20] x 1 x 100 = $550
Since the 47-strike call has the highest margin requirement ($910), this makes the total margin requirement $1,030 since the premium from the put side ($910 + $120) is added to the margin requirement. The maintenance requirement for a short straddle will be calculated using the same formula.