short options margin ques

omer486

Newbie
1 0
Lets you have $20,000 in your account and you buy $20,000 of a stock with 50% margin requirement. Now you have put up 100 % margin and have zero loan.

Then you sell options in some other stock for a credit of $600 and a margin requirement of $8000. Now does your margin in the stock position fall below 100% and will you start being charged interest on that position?
 

wackypete2

Legendary member
10,229 2,055
Yes, correct.
Options are not marginable. The margin requirement for options must be cash. But in your example your broker will "lend" you the $8,000 against your stock holdings since you only needed $10,000 margin there and then charge you interest on it. The $8000 is treated as margin against your stock.

If you only had $10,000 in your account and you purchased $20,000 of stock then the only option transaction you could complete would be covered calls.

Peter
 
 
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