RobinHood says - if you have short credit spread and it requires $500 collateral - than they will block $500 cash in my account as collateral - they do not use my stocks as collateral ...I have 50k value that includes different stocks All brokers are like that or just RH? I have individual margin account(not IRA neither cash ac)
I use Schwab which allows use of long positions to cover short position risk with varying degrees (unlike RH apparently). I am unfamiliar with RH personally, but presented your question to Grok. Here is it's response. I have not vetted this response, so take with grain of salt: Robinhood’s policy of using cash (not stocks) as collateral for spreads is tied to its operational model. They explicitly state they “hold cash” for credit spreads and don’t use “Gold Buying Power” (margin borrowing capacity) or securities as collateral. This simplifies risk management for them, ensuring liquid funds are available if the spread moves against you or gets assigned. Do All Brokers Work Like This? Not necessarily—collateral policies vary across brokers, especially for margin accounts: Cash-Only Collateral (Like Robinhood): Robinhood’s approach is straightforward: they lock cash equal to the max loss. This is common among brokers targeting retail investors with streamlined platforms (e.g., Webull, Tastytrade), as it avoids the complexity of valuing securities as collateral. Advantage: Clear, predictable requirements. Disadvantage: Ties up cash that could be used elsewhere in the portfolio. Securities as Collateral: Traditional brokers like Interactive Brokers, Fidelity, or Charles Schwab often allow securities (stocks, ETFs, etc.) in a margin account to serve as collateral, per Reg T rules. The Federal Reserve requires 50% initial margin and 25% maintenance margin for stocks, but for defined-risk trades like credit spreads, brokers may use the portfolio’s equity to offset requirements. For example, with $50,000 in stocks, you might have $25,000 in buying power. A broker could use this equity to secure a $500 spread without locking cash, as long as the account meets maintenance requirements. Advantage: Frees up cash. Disadvantage: Risk of margin calls if stock values drop. Portfolio Margin: Advanced brokers (e.g., Interactive Brokers, TD Ameritrade/Charles Schwab’s thinkorswim) offer portfolio margin, which calculates requirements based on the overall risk of your holdings, not just the spread. With $50,000 in value, your $500 spread might not require any additional cash if the portfolio’s risk profile supports it. This is less common for retail-focused platforms like Robinhood, which prioritize simplicity over flexibility. Hybrid Approaches: Some brokers (e.g., E*TRADE) might use a mix of cash and securities, depending on account settings and the trade. They may reserve cash for the spread but allow excess equity to support other positions. Is Robinhood Unique? Robinhood’s cash-only collateral requirement isn’t universal but isn’t rare either. It’s typical of newer, app-based brokers catering to less-experienced traders who value simplicity. Traditional brokers with more sophisticated systems often leverage securities in margin accounts, especially for clients with larger portfolios like the user’s $50,000. The choice reflects a trade-off: Robinhood: Ensures the user always has liquid collateral, avoiding forced liquidation of stocks. Others: Maximize flexibility but require more active management (e.g., monitoring margin levels). Conclusion With the info provided, you can reasonably decide that Robinhood’s policy suits someone who prefers predictable cash reserves for spreads, while other brokers might appeal if you want to leverage your $50,000 in stocks instead. To confirm how this applies to specific brokers, you’d need to check their margin policies—e.g., Interactive Brokers’ website details securities-based margin, while Robinhood’s support pages confirm their cash focus. The user’s situation ($50,000 portfolio, $500 spread) suggests they could explore brokers allowing securities collateral to free up cash, but Robinhood’s approach isn’t an outlier among similar platforms.
The grass may look greener...But they get you with their exit fees. Develop a good stable relationship with a broker and stick with it!! People go around in circles from broker to broker... Exit fees add up...And they can be raised at anytime... Robinhood charges a $100 fee to transfer assets or cash to another brokerage, which is debited from your Robinhood account's available cash balance.
Options are non-marginable - cash only. You need a margin account to trade options, but you cant use margin to trade them.