Customer Portfolio Margining Program

Support for Portfolio Margin Traders

GlobalVest offers Portfolio Margin accounts to retail, institutional clients, and high net worth clients. Hedge funds, firms with JBO status, and public customers with options trading experience are encouraged to contact GlobalVest broker to discuss Portfolio Margin account requirements, trading strategies and services.

The minimum Portfolio Margin account requirements are:

  • Only available to (non-IRA) accounts that GlobalVest approves to write uncovered puts and calls.
  • Must have and maintain a net liquidating value of at least $250,000 in the account.
  • Must review and acknowledge a Customer Portfolio Margin Risk disclosure statement and agree to our clearing firm's "House" risk parameters for trading and positions.
  • Smaller accounts cannot be combined to meet the $250,000 requirement.
  • In the event your account falls below $250,000 Net Liquidating Value you will have two days to bring your account above this watermark or you will be removed from the Portfolio Margining System.

Portfolio Margin Informarion:

The U.S. Securities and Exchange Commission has instituted a broad revision to its margin regulations that resulted in a risk-based margining program for qualified U.S. investors. The Portfolio Margining program began on April 2, 2007 for qualified clients from a select group of U.S. brokers.

Portfolio Margin is a method for computing margin for stock and option positions that is based on the risk of the position rather than the fixed percentages of Regulation T and FINRA Rule 2520. The method uses theoretical pricing models to calculate the loss of a position at different price points above and below current stock or index price. The largest loss identified is the margin of the position. The result is often lower margin requirements than would be calculated under Regulation T, where margin is required for both the stock and any offsetting option positions.

For decades margin requirements for securities (stocks, options, and single stock futures) accounts have been calculated under this Regulation T rules-based policy. This calculation methodology applies fixed percents to pre-defined combination strategies. With Portfolio Margin, the margin is based on the largest potential loss found by valuing the portfolio over a range of underlying prices, and volatilities. It is available for all US stocks, OCC stock and index options, and US single stock futures positions.

Portfolio Margin Details:
According to Options Clearing Corporation (OCC) defined product baskets, positions for stocks and options are subject to a test of +/- 15% price changes. Small cap broad-based indices are tested with +/- 10% price changes. Large cap broad-based indices are tested with +6%/-8% price changes. The high to low range is divided into eight equidistant points, and the loss on the position is calculated at each of the eight points and the two high and low points.

Beyond the margins computed by this method, there are the following adjustments:

  • OTCBB stocks, bonds, etc. margins do not change under portfolio margining so these need to be added.
  • $37.50 per contract minimum (assuming the standard multiplier of 100), mandated by OCC.
  • Similar classes, such as OEX and SPX, make up product groups and are offset against each other by designated percentages.
  • Similar product groups, such as growth indices, small cap indices, etc., constitute portfolio groups and are offset against each other by their designated percentages.

These adjustments can increase the calculated margin requirement, which can be adjusted by the clearing broker for additional risk parameters. Stocks and indices with high-implied volatility, an individual position that is highly concentrated, or positions that have large Vega or other risk situations will have margin requirements higher than the minimums established by the regulations.

Prior to any trading account being opened, all potential clients wishing to trade under the guidelines of a portfolio margined account will undergo an interview with GlobalVest' Senior registered option principal in order for the firm to ascertain the client's knowledge of option trading, option strategies, and the risks associated with a portfolio margined account. In addition, all required account documentation is to be completed and reviewed by both GlobalVest and its clearing firm prior to an account approval and opening. GlobalVest reserves the right to approve or not approve an account for portfolio margin status for any reason. GlobalVest also reserves the right to sell out any position at any time in a portfolio-margined account.

Important Disclaimers Regarding Portfolio Margin Accounts:

    Certain risk guidelines for Portfolio Margin accounts are set by the SEC, other regulatory agencies, Bank of America Merrill Lynch, Penson Financial and GlobalVest and differ depending on the type of instruments in a trading account and other factors.
    Portfolio margin risk levels and related capital requirements can significantly vary day-to-day depending on the volatility of positions in a portfolio and on the movements of the overall market.
    The potential loss for the writing of uncovered puts and calls is unlimited and the use of margining may accelerate the velocity of potential losses and may require additional capital to cover any and all margining requirements.
    Multiple leg option strategies, including spreads, will incur multiple commission charges.
    High trading volumes and potential congested system access may delay execution of trades.
    All contents of this document are for educational purposes only. GlobalVest do not offer investment advice.
    Please note that options are not suitable for all investors and investing in options carries substantial risk. Because of the importance of tax considerations to all options transactions, investors considering options should consult with a tax advisor as to how taxes affect the outcome of contemplated options transactions.
    Individuals should not enter into options transactions until they have read and understood the risk disclosure document titled "Characteristics and Risks of Standardized Options." To obtain a copy of the Options Disclosure Document contact us at 646-201-5026.
    Portfolio Margin risks do not represent all risks associated with positions in a particular portfolio. Dramatic day-to-day changes in the implied volatilities are not represented in the risk analysis. Margin requirements may be significantly greater than simple Risk-Based Haircuts (RBH) calculations. RBH is not a Value at Risk (VAR) calculation and does not make a correlation between stocks in a portfolio.
    GlobalVest and its clearing firm will apply their own risk guidelines and limits to all approved portfolio margined accounts. These guidelines and limits may be more stringent than what is available under portfolio margining rules. GlobalVest may also require additional margin beyond the risk-based margin requirements, particularly for positions with naked or uncovered calls or puts.
    Note that you can lose more funds than you deposit in the margin account; GlobalVest can increase its "house" maintenance margin requirements at any time and is not required to provide you advance written notice; and you are not entitled to an extension of time on a margin call.
    Please note that current or pending portfolio margining rules, guidelines and requirements are subject to change by the SEC, NYSE or other regulatory entities.

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