Long Time Spread: Equity Options
Net cost of the spread (cost of long option – credit of short option)
The short option must expire before the long option. For a long call time spread, the strike of the short call must be equal to or higher than the strike of the long call. For a long put time spread, the strike of the short put must be equal to or below the strike of the long put.
(premium received from the sale of short put(s) or call(s) may be applied to meet the initial margin requirement)
Sell to open 10 contracts Feb 45 Call at 1.30
Buy to open 10 contracts Jun 45 Call at 3.30
(3.30 -1.30) x 10 x 100 = $2,000
The market values and margin rates used to compute the initial and maintenance margin scenarios utilize OptionsHouse house standards. Higher margin rates may be utilized when calculating these scenarios.
The amount of money you can borrow on margin toward the purchase of securities is typically limited to 50 percent of the value of marginable securities in your account. However, it is prudent to borrow less to minimize risk.
Once you borrow on margin, you are required to maintain a certain amount of equity in your account, depending on the securities you hold. Typically, the equity maintenance requirement is at least 30% of the total account value, but it can be higher for certain securities or accounts.
Margin loans may be established by our clearing firm, Apex Clearing Corporation (“Apex”), in its sole discretion regardless of the amount of collateral delivered to Apex, and Apex may change such minimum and maximum amounts from time to time without notice to our customers.
In the interest of ensuring the continued safety of our clients, Apex may, without notice, modify certain margin policies to adjust for volatility in financial markets. The changes will promote reduction of leverage in client portfolios and help ensure that clients’ accounts are appropriately capitalized.