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Hello all, can somebody teach me what is meaning of 'Premium is margined' in context of options contract? Does it mean that, when I buy such option, premium goes to my margin account (not to the writer directly) and I will accrue interest as long as I don't exercise this option? Once I exercise this options, I get the underlying (in case of call options) additionally the accumulated interest ?Thanks,

No, you don't get interest on the premium you pay. From what I've seen, you cannot buy options on margin, unless they have more than 9 months to expiration. When you sell options, the premium you receive is added to the margin requirement.

Margined premium is typical for options on futures, eg Euribor, Sterling 3m, Bund,Bobl, Schatz etc.When purchasing an option, you are not required to pay the premium immediately or t+1, but the option position is 'margined' much like a normal futures position. Youo will need to post an initial margin to cover overnight PnL moves on the position. Every evening all positins are valued at the Mark to Market price, and profits are credited to your account, while you would need to pay any losses - the standard variation margin of futures.In effect, one is assumed to pay the premium over the life of the option at the rate of theta. Imagine that you buy a 1 month At the Money option, and the underlying future, implied vol etc all remain constant for the term of the option. In this case your daily loss on the position will be theta, which you pay daily via the variation margin. Use the Black 76 model to price these options

QuoteOriginally posted by: bwarrenNo, you don't get interest on the premium you pay. From what I've seen, you cannot buy options on margin, unless they have more than 9 months to expiration. When you sell options, the premium you receive is added to the margin requirement.For futures I am sure I knew some guys that were taking out positions to get the IR on the futures margin. Perhaps I am mistaken.