QuoteOriginally posted by: gjlipmanMargining is a real nightmare, as different people mean different things by it. All exchange traded commodities options require margins, in the sense that you put up collateral, but that collateral is earning you interest, so doesn't technically need to be taken into account in valuing the option (at least it is second order).So, if the only margining required for an option is putting up collateral, for which you receive interest, or there is no margining at all (eg in the case of an OTC option on a future), you do use a discount factor.There are a few examples in commodities options where you have to make margin payments that don't go into your collateral account, ie you don't get the value from them. These are (correct me if I'm wrong) typically the options where the premium isn't paid up front. IPE have some options on futures that use this approach (though these might all be American anyway, in which case you shouldn't be using Blacks formula). In this case, I don't think you would use a discount factor.My logic for this is as follows: imagine you've got a long dated european in the money option on an underlying with zero volatility, premium deferred. So, if we don't incorporate discount factors, it's value is F-K the whole time, we never make variation margin payments, and never get any money at the end, which makes sense. If we did incorporate discount factors, the value would be increasing each day, and we'd be making payments each day, to not receive anything in the end, which wouldn't make sense.My doubt on the last paragraph. Zero vol essentially is a forward which is justified by F-K payment. So, my question is should we be discussing this example as there seems to be no optionality involved.