Buying Power/Margin for SPY put writing

Discussion in 'Options' started by asdfghj7, Nov 14, 2008.

  1. I have a 35K account with IB. I wanted to buy 400 shares of SPY. I wrote 4 November 87 calls at 3pts expiring next Friday. My net liquidation value is around 36K. My RegT margin is around 7000.
    My current available funds are around 29000. My Buying power is around 90K. What would these numbers be if Monday opens at 80 and all of these are exercised?

  2. 1) You wrote puts, not calls

    2) If SPY is 80 next Monday there is zero probability you will be assigned.

    3) Buy if you are assigned, you will own 400 shares of stock valued at $32,000.
    You will have paid $84 for those shares (strike minus premium). Your loss would be 12,000.

    Assuming you started with 35k, you would now have an account that's worth $23,000 and you would own 400 shares @80.

    4) Owning $32,000 worth of stock, your reg T requirement would be $16k. Thus, no margin call.

    5) You would have $7k of excess cash and your buying power would be $14,000.

  3. maybe he wrote calls thinking they were puts :D
  4. Marks right. They were puts.