Expiring bull call spread margin?

Discussion in 'Options' started by DiagonalSpread, Feb 1, 2007.

  1. If I have a bull call spread where both sides are expiring in the money do I need to have enough margin available to purchase the lower strike stock?
  2. should have specified vertical spread
  3. hopback


    from a margin stand point,:
    the Profitable Option rule will allow you to liquidate a stock position on the business day following expiration without incurring any violations but you have to remember that brokers are allowed to impose additional restrictions on top of those set by the regulatory bodies.
    Also, if your account is "cash up front" restricted from prior margin violations you would be limited to the cash + excess equity in the account.

    I'd say check with your broker.

    from a risk stand point:
    if both legs are deep ITM you shouldn't have any issues (the spread has already been paid for) but if there's a chance that the short leg may expire worthless, your broker's risk department will look at the size of you account compared to the expected stock purchase and could force you to close the whole position if its too large for the account.
  4. Thanks Hopbak - Do you happen to know what the rules are at IB - I would check with them but I've gotten so much bad info from there customer service that I wouldn't feel confident in their reply - other than CS though I really like IB.
  5. MTE


    If both options are ITM then both will be exercised and you'll be left with the difference between the strikes, you don't really need any margin here.
  6. hopback


    I don't know IB's house rules.

    I know their margin maintenance system used to be completely automated and would sell you out without any human involvement. Don't know how it is now.

    Also, i don't know how any of their expiration procedures.

    I'd speak to the trade desk not customer service.