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Eventually I would like to have capital allocated to diversification where $X of margin is dedicated to semiconductor put spreads, $Y to Pharma etc. It is hard to do this in a platform like Etrade as that custom sub view is not available. I think you will need a custom front end that lets you make “sub accounts” yet utilize underlying the common margin pool.
Hello DocFever…There are a couple of factors for me that decide this
1. Margin used up by the trade vs margin available. Margin is always a prized commodity and the number of positions is directly proportional to the margin that trade will suck up. You have to decide how much of available margin you want to allocate to one trade
2. Risk margin set aside : I also leave a certain amount of margin spare at all times. If you are caught ITM, you always have the option to roll but I also try and decide the qty to make sure that I will have enough margin to take that assignment. Of course if 2 or more positions are caught ITM then this is not possible and the rest have to be rolled but I like to maintain spare margin for one assignment at all times.
3. Quality of Premium : I look at ratio of net premium received for the trade vs margin used up. If the quality is low then I limit the number of put spreads sold because there will be other trades with higher quality.
FWIW…my smallest trades are 5 positions and highest are 30 so far and all the factors above help play a part in deciding.
Hope this helps.