short options margin ques

[omer486]

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]

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