I am trying to tippy toe into volatility trading and volatility strategies.
So I was reading Sheldon Natenberg where he starts off with a portfolio of long ATM call and short 50 shares of stock to set up a delta neutral position.
Now if stock goes up (let us say 5%), he shorts additional shares to become delta neutral again.
My question is, how do margin calls feature into this? if the stock goes up a certain amount, my initial short position is in risk of margin call(being auto liquidated). This risk becomes increasingly prominent as I keep selling all the way up, to maintain my flat position.How can I factor in this risk while evaluating this strategy?
Let us assume that both initial and maintenance margin is 30% and I utilized maximum margin while opening the trade.