The amount of account capital a position ties up while it is open; the real denominator for any options return calculation.
BPR is not the same as maximum loss. For defined-risk structures the two are usually similar. For a naked-put or naked-call, BPR is set by a formula that can be many times the premium collected and can rise sharply if the position moves against you.
Because BPR changes with price and implied-volatility, a portfolio that looked fine on Friday can be over its limit on Monday without a single trade. That is how forced liquidations happen.
Example: sell one XYZ $45 put for $1.30 with XYZ at $50. Under reg-t-options-margin the BPR is roughly 20% of $5,000 minus the $500 out-of-the-money amount plus premium — about $630. If XYZ falls to $46, the same short put may require over $900 while also showing a loss.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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