5752. Short underlying interest – long call option combination

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    1. Where a Dealer Member inventory or client account contains one of the following exchange-traded option and security combinations:

       

      Short position

       

      Long option position

      (i)

      underlying interest

      and

      call option with the same underlying interest

      (ii)

      qualifying basket of index securities

      and

      index call option based on the same index

      (iii)

      qualifying basket of index securities

      and

      index participation unit call option based on the same index

      (iv)

      index participation unit

      and

      index participation unit call option based on the same index

      (v)

      index participation unit

      and

      index call option based on the same index

      and equivalent quantities of each position in the combination are held, the minimum margin required for the combination is calculated in accordance with subsection 5752(2).

    2. Subject to additional margin requirements set out in subsection 5752(3), the minimum margin required is the sum of:

      1. 100% of the market value of the long call option,

      2. plus

      3. the greater of:

        1. the lesser of:

          1. any out-of-the-money value associated with the call option,

          2. or

          3. the normal margin required on the underlying interest,

        2. where the combination involves:

          1. a qualifying basket of index securities and an index participation unit option position,

          2. or

          3. an index participation unit position and an index option position,

          4. the published tracking error margin rate for the spread between the index and the related index participation units, multiplied by the market value of the index participation units underlying the index participation unit option position or index participation unit position held,

      4. minus

      5. where the call option is in-the-money, the in-the-money value, provided the overall margin requirement cannot be reduced to less than zero.

    3. Where the combination involves a qualifying basket of index securities and the basket is imperfect, additional margin is required to be provided in the amount of the calculated incremental basket margin rate multiplied by the market value of the basket.

    There is no history log for this rule.

    There is no history log for this rule.