Quantcast
  1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

RTT Definitions

Discussion in 'Beginner Traders' started by NoMoWork, Dec 12, 2016.

Tags:
  1. NoMoWork

    NoMoWork Member

    New to the RTT group and have watched the weekly trade updates and Q&A sessions. The term "margin" seems to have different definitions here. In one respect, as near as I can tell, it refers to the maximum loss on a trade. I've always understood it to mean the cash the broker sets aside for a specific trade. Can anyone help me understand how this community is using this term?
     
  2. DGH

    DGH Administrator

    I generally use the term "margin" in the "Class" positions (within my Reg T account) to refer to the "Buying Power effect". That is, it's the reduction in buying power as a consequence of a trade. In TOS this is easily seen in the right side column labeled "BP effect". The "BP effect" is not necessarily the same as the max loss amount, which can be seen at the far left of an expiration graph. Now, in a portfolio-managed account or by using a vehicle which uses SPAN margin parameters, the term has a somewhat different meaning. Some people in the CD community use "margin" to mean max loss. So, it is important to understand the distinctions in the context of the discussion.
     
  3. NoMoWork

    NoMoWork Member

    Thanks Dan. Is the TOS Buying Power Effect the amount you use to enter in the RTT Trade Entry Tool in the "Margin Required" field? And is that same number used in the calculation for the 5% margin to trade debit rule?
     
  4. DGH

    DGH Administrator

    Yes, because that is the margin requirement which TOS is actually using for a particular cycle.
     
  5. DGH

    DGH Administrator

    Oh, I left out the answer to the second question. Yes, I use the same BP effect for that margin as well. However, I think that Tom uses Optionvue max loss as the margin requirement when he does his calculations. The numbers are generally fairly close in Reg T accounts, but not identical. I use the TOS BP effect as the margin because I set up and analyze trades in TOS initially. The most important thing is to be consistent with whichever margin requirement that you use.
     
  6. garyw

    garyw Well-Known Member

    Davidrete: Me thinks you may be a bot!
    Please confirm/deny!
     
  7. DGH

    DGH Administrator

    Yes, we think he is a bot, too. Tom has deleted posts which have no relevance, including the one above.
     

Share This Page