Question about trading opts diagonal spreads

Discussion in 'Options' started by etrades, Jan 13, 2020.

  1. etrades

    etrades

    Hi guys,

    I have a question about a scenario when trading opts diagonal spreads.

    If I have the below spread:

    Short 1 put contract at strike price 100 for Jan 10 2020
    Long 1 put contract at strike price 90 for Dec 10 2019

    What happens when both the contracts are ITM on Dec 10 2019 when the long contract is closed ?

    Does it simply require increased margin on the open position ?

    Thank you
     
  2. ET180

    ET180

    I have been heard that your broker will treat the short position as naked for the entire duration of the trade. As long as the short option has a longer duration than the long, the long will not serve to reduce margin at all. Someone else please confirm.
     
  3. FSU

    FSU

    Yes short time spreads have a high margin requirement. The only way around this is with a Portfolio margin account.
     
    mdszj likes this.