Singha,
The CBOE Margin Manual explains the margin requirements for most options trades.
http://www.cboe.com/LearnCenter/pdf/margin2-00.pdf
You don't need to have a margin account to trade bull verticals, calendars, symmetrical flys, etc - in those cases you have short legs that are "covered" by the other long legs of the spreads. Not the case with condors, broken wing flys, diagonals, etc - where the short legs are "exposed" - the latter trades are "defined risk", but the risk is much greater than the debit (or credit) that was incurred putting on the trade, so the broker needs to reserve your funds to cover that risk.
We have been seeing some very long flat-lining markets: you will lose money on directional options trades in these markets if you don't get your entry timing right and don't have lots of time in the options. Trading long stocks has advantages - even if you are wrong about a stock's directional moves, if it is a good name and does not fall too far, you may lose money but not all your investment - and you have time. I have sat on stocks for >10yrs waiting for them to climb back from a deep drop, and many did and finally made a good profit.
Options, though, well you will often lose most or all of the money you spend on long options positions. The saving grace of trading options is that you can structure spread trades that are inexpensive but that still have decent or better return potential.
The bottom line about flat-lining markets, though, imho: they are not worth trading. Better to just raise cash and wait for better conditions.
The CBOE Margin Manual explains the margin requirements for most options trades.
http://www.cboe.com/LearnCenter/pdf/margin2-00.pdf
You don't need to have a margin account to trade bull verticals, calendars, symmetrical flys, etc - in those cases you have short legs that are "covered" by the other long legs of the spreads. Not the case with condors, broken wing flys, diagonals, etc - where the short legs are "exposed" - the latter trades are "defined risk", but the risk is much greater than the debit (or credit) that was incurred putting on the trade, so the broker needs to reserve your funds to cover that risk.
We have been seeing some very long flat-lining markets: you will lose money on directional options trades in these markets if you don't get your entry timing right and don't have lots of time in the options. Trading long stocks has advantages - even if you are wrong about a stock's directional moves, if it is a good name and does not fall too far, you may lose money but not all your investment - and you have time. I have sat on stocks for >10yrs waiting for them to climb back from a deep drop, and many did and finally made a good profit.
Options, though, well you will often lose most or all of the money you spend on long options positions. The saving grace of trading options is that you can structure spread trades that are inexpensive but that still have decent or better return potential.
The bottom line about flat-lining markets, though, imho: they are not worth trading. Better to just raise cash and wait for better conditions.
"If The Fool persists in his Folly he will become wise." - William Blake
