What is the margin requirement for a dollar neutral long short portfolio

What is the margin requirement for a dollar neutral long short portfolio

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iank · External communityPost link
External question — Quantitative Finance Stack Exchange Author: iank Original post: https://quant.stackexchange.com/questions/75063 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I have been working on a market neutral pairs trading strategy. See https://medium.com/@nderground-net/backtesting-a-pairs-trading-strategy-b80919bff497 I am trying to understand whether I am properly estimating the margin requirement for the S&P 500 pairs. I have talked to Interactive Brokers support about this question but they were of limited help. My understanding is that if I have 1000 margin allocated for the long/short pair I can short 2000 of stock (ignoring share issues). This is 50% cash for the short. When the short is executed, the account will be credited with 2000 from the short proceeds. I then take a long position in 2000 of stock with the proceeds of short. The end balance (again ignoring share price issues) is a 2000 short position and a 2000 long position and 1000 in margin. Is this a correct analysis of how a long/short position can be built? Many thanks, Ian
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: iank Source score (net votes, not local likes): 0 Original post: https://quant.stackexchange.com/questions/75063 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I have been working on a market neutral pairs trading strategy. See https://medium.com/@nderground-net/backtesting-a-pairs-trading-strategy-b80919bff497 I am trying to understand whether I am properly estimating the margin requirement for the S&P 500 pairs. I have talked to Interactive Brokers support about this question but they were of limited help. My understanding is that if I have 1000 margin allocated for the long/short pair I can short 2000 of stock (ignoring share issues). This is 50% cash for the short. When the short is executed, the account will be credited with 2000 from the short proceeds. I then take a long position in 2000 of stock with the proceeds of short. The end balance (again ignoring share price issues) is a 2000 short position and a 2000 long position and 1000 in margin. Is this a correct analysis of how a long/short position can be built? Many thanks, Ian

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