Calculating the Required Margin

Discussion in 'Options' started by Timmmmn, Dec 30, 2019.

  1. Timmmmn

    Timmmmn

    Im new to Options and have a Question on how to calculate how much Margin i need to trade an Option.

    Lets say i have an Call on a stock which costs 100€. I pay 500€ on a Call Option for 100 stocks with a Strike Price of 110€ ( I know the numbers are bullshit but just as a example). At the expiration date the Price is at 120€. So if i use the Option for 1000€ profit now do i need 12000€ (100*120€) to do it or do i need just the 500€ i paid upfront. So how big does my account has to be to do that.
     
  2. ET180

    ET180

    Your broker should tell you the margin requirement when you submit the trade. My broker tells overnight as well as initial.
     
  3. tommcginnis

    tommcginnis

    Having purchased a $110 call already, your had the call's value (at least) in your available balance already.

    Going forward, your question now is whether you have the balance required to purchase the $120 underlying (at your call's $110 strike), should you wish to exercise it. The required margin will be up to the underlying's multiplier (100?) and your broker and how they treat that asset for exercise.

    But the question you have is in regard to purchasing the underlying, not the value/margin requirement of the (long) option.
     
  4. cvds16

    cvds16

    you don't have to exercise your option at settlement, you can just sell it beforehand so you don't actually need the underlying value if I understand your question correctly.
     
  5. minhmoc85

    minhmoc85

    Which Broker are you trading now ? I think the margin should be displayed when you start trading.
     
  6. Amun Ra

    Amun Ra

    You only need margin to write options, not buy them. You're ok with buying options in a cash account.

    If you hold that call to expiration, on the following Monday you'd end up with 100 shares of XYZ company and you'd have a -11,000€ balance in your account. I believe this is called freeriding. My broker let me get away with it once without any penalty, but I think only because I called him on Saturday to let them know what was up. They said it was good I called and let me sell the securities on my own on Monday without a violation. I got lucky though because my stock opened up $1.50 higher that day so I made out nicely.