Married put strike selection?

I was recently looking at the CBOE margin manual regarding rules around married puts and did some analysis on what prices for put strikes and underlyings might be most efficient for margin purposes. It was not what I expected.

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First an excerpt from the CBOE margin manual:

Initial requirement:

* Pay for put in full. 50% requirement on long underlying position

Maintenance requirement:

* None required on put (no loan value). Provided long put is American style exercise, long underlying position requirement is the lower of: 1) 10% of the put exercise price plus 100% of any out-of-the-money amount, or 2) 25% of long underlying position market value.

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Examples with relatively market-neutral positions (ie, put near delta -1.00) at about 40 DTE:

Example: SPY @$400/sh + 600 strike put

* initial requirement: $200/sh for put + $200/sh for shares * maintenance: lower of $60/sh (10% \* $600/sh +$0/sh OTM) or $100/sh (25%) * stats: * **put ITM per underlying price: 50% (200/400)** * **put maintenance margin ratio: 60% ($60/sh versus $100/sh)**

Example: SPY @$400/sh + 450 strike put

* initial requirement: $50.20/sh for put + $200/sh for shares * maintenance: lower of $45/sh (10% \* $450/sh + $0/sh OTM) or $100/sh (25%) * stats: * **put ITM per underlying price: 25% (50/400)** * **put maintenance margin ratio: 45% ($45/sh versus $100/sh)** * Note: the put includes a more nontrivial extrinsic value

Example: TSLA @$200/sh + 400 strike put

* initial requirement: $200/sh for put + $100/sh for shares * maintenance: lower of $40/sh (10% \* $400/sh + $0/sh OTM) or $50/sh (25%) * stats: * **put ITM per underlying price: 100% ($200/sh versus $200/sh)** * **put maintenance margin ratio: 80% (40/50)**

Example: UNG @$6/sh + 17 strike put

* initial requirement: $11/sh for put + $3/sh for shares * maintenance: lower of $1.70/sh (10% \* $17/sh + $0 OTM) or $1.50/sh (25%) * stats: * **put ITM per underlying price: 183% ($11/$6)** * **put maintenance margin ratio: 113% (1.70/1.50)**

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Thoughts on these examples:

* They suggest that the 10% put maintenance margin rule may offer the most margin relief with a *less ITM* put. * The additional extrinsic value in these contracts might raise the questions about: * the cost/benefit of having that additional volatility exposure outright * the cost/benefit of alternative positions such as selling the corresponding call (which eliminates the availability of the 25% stock maintenance margin rule per the CBOE margin manual) * Not all participants may want a deep ITM put. But if the goal is, eg, an ATM or OTM married put, the analysis should include various ways to achieve the desired combination of delta and volatility exposure (eg, also considering selling stock plus a long call), which is a much broader scope discussion * Ie, it doesn't make sense to optimize margin only at the expense of expected returns

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[https://cdn.cboe.com/resources/membership/Margin\_Manual.pdf](https://cdn.cboe.com/resources/membership/Margin_Manual.pdf)