Reg-T vs. Portfolio Margin for Options Traders
Compare Reg-T and portfolio margin for options, including buying power, leverage, risk-based requirements, stress, concentration and why lower margin is not lower risk.
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OPTIONS EDUCATION GUIDE
Option Position Sizing: Why Contract Count Is
One contract is not a universal position size. The obligation behind one option contract can be tiny in one underlying and enormous in another.
Prepared by Farland Capital Education Team · Educational methodology
Assignment value
- A short put can become 100 shares per contract.
- Strike price multiplied by 100 provides a quick view of the gross stock purchase obligation.
Buying power is not risk
- Broker buying-power requirement is a financing/risk-control calculation, not the maximum economic loss.
- Requirements can increase when volatility rises or positions become more stressed.
Portfolio concentration
- Multiple positions in technology, semiconductors or broad equity beta can behave like one concentrated bet during a selloff.
- Size should therefore account for correlations and common risk factors.
Stress-based sizing
- Ask what happens if the underlying falls sharply, implied volatility rises and several positions move against you simultaneously.
- Preserve enough liquidity that you can manage risk without being forced into liquidation.
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Educational purposes only. This page is not individualized investment advice or a recommendation to use any security or strategy. Options involve risk and are not suitable for all investors.