Margin Requirements for Option Strategies

1. Covered Call

Definition: Long Stock + Short Call, and the quantity of the underlying stock is same as the contract size of the call option

Margin Requirement: Long Stock Margin 

Buying Power Requirement: 

If you have enough shares of the underlying stock and then sell to open a call option, the selling order of call will also apply the margin reduction with no buying power required.

Note: If no margin reduction is applied, it may be caused by your holding insufficient shares or your operation of closing position in the underlying stock.

2. Covered Put

Definition: Short Stock+Short Put, and the quantity of the underlying stock is same as the contract size of the put option

Margin Requirement: Short Stock Margin + In-The-Money Amount of Short Put    

Buying Power Requirement:

1. If you hold the short position of the underlying stock and then sell to open an out-of-the-money put option by placing a single-leg option order, the single-leg option order will also apply the margin reduction with no buying power Requirement.

2. If you hold the short position of the underlying stock and then sell to open an in-the-money put option by placing a single-leg option order, the single-leg option order will also apply the margin reduction and release an amount of buying power after the order submitted.

Note: If no margin reduction is applied, it may be caused by your holding insufficient shares or your operation of closing position in the underlying stock.

3. Vertical Spread

Definition: 

1. Vertical Call Spread: Long Call + Short Call (same expiration date, same underlying stock, same contract size)

2. Vertical Put Spread: Long Put + Short Put (same expiration date, same underlying stock, same contract size)

Margin Requirement:

1. Vertical Call Spread: Market Value of Long Call + Max(Long Call Strike – Short Call Strike, 0) X Contract Size

2. Vertical Put Spread: Market Value of Long Put + Max(Short Put Strike – Long Put Strike, 0) X Contract Size

Buying Power Requirement:

1. If you open a vertical spread position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula;

2. If you hold a long position of call(put) and then sell to open a call(put) with a higher(lower) strike price, the short sell order of call(put) will also apply the margin reduction with no buying power required;

3. If you hold a long position of call(put) and then sell to open a call(put) with a lower(higher) strike price, the short sell order of call(put) will also apply the margin reduction and release an amount of buying power after the order submitted;

Note:

1. If no margin reduction is applied, it may be caused by your holding insufficient long options, your operation of closing the long option position, or a different contract size;

2.The margin reduction and buying power requirement for butterflies, condors, iron butterflies, and iron condors shall be calculated based on the logic of vertical spreads.

4. Straddle

Definition: 

1. Long Straddle: Long Call + Long Put (same expiration date, same strike price, same underlying stock, same contract size)

2. Short Straddle: Short Call + Short Put (same expiration date, same strike price, same underlying stock, same contract size)

Margin Requirement: 

1. Long Straddle: Market Value of Long Call + Market Value of Long Put

2. Short Straddle: Max (Short Call Margin, Short Put Margin)

Buying Power Requirement: 

If you open a straddle position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula.

5. Strangle

Definition: 

1. Long Strangle: Long Call + Long Put (same expiration date, same underlying stock, same contract size, Put Strike < Call Strike)

2. Short Strangle: Short Call + Short Put (same expiration date, same underlying stock, same contract size, Put Strike < Call Strike)

Margin Requirement:

1. Long Strangle: Market Value of Long Call + Market Value of Long Put

2. Short Strangle: Max (Short Call Margin, Short Put Margin)

Buying Power Requirement: 

If you open a strangle position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula.