That would be too easy because it would solve the problem. It's more interesting to the muse about unrelated issues.
Thats the thing... they won't let me get any margin even though my account can cover the loss's I've dicussed with them. $1 or $10 they won't let me have it either way. It's a joke if you ask me. If that's the inconvenience of American based brokers I guess I'll just stick with my offshore foreign exchange brokers and forget options for now. I'll come back to options in 10 years with $200,000 and see how it is then. Thanks for all the input.
Just get a different broker and be done with it. You have no problem with any of a number of good option brokers. This has nothing to do with either being assigned on the short option (because your long call covers you) or whether the option is American of European style. These are Red Herrings. Just don't try to enter this spread order as two independent orders simultaneously. They have to be executed as a package or you'll have to acquire the long leg first. Get another broker.
Cash Profits-- here's my two cents worth. Your concerns are reasonable, but the rules won't change. Brokers generally want protection, and many of them barely understand the options business. (There are only about 4-5 brokers who really know how to do retail options well) So... Save up your money, study the craft carefully (it's far more complex than stocks) and open a margin account with a good broker when you have enough money. Doing an option strategy to earn a maximum of $40 is barely worth the time and effort involved, even if it is a sound strategy. You'll need more capital anyway if you want to make decent money without the ridiculous risk of total loss.
Thanks for all the input. What broker should I go to then so I can avoid the bs that Options House has pulled on me? Options House does not state anywhere in the open about needing margin to sell spreads or especially to short calls and puts. As soon as I open the account thinking I can do so I get shut down. It may be in the fine print but I doubt that too. They just hide that info from you, hope you use other strategies and call it a day. Like I said before when you place your order it doesn't matter in which order you place the legs... the Options House order form knows if your trying to put in a spread, covered, naked, put or call. They simply stated in order to short anything at all I need a margin account in which they refuse to grant me with. They will not grant me with margin because I can take part in risky transactions which is true. What they lack is the ability to lock my account on only allowing certain types of trades (ie: covereds and spreads). If you ask me that is a poor platform. In the year 2009 with all the technology available that should not be a difficult task to fullfil by an online platform. If I am selling a call spread I don't have the risk of "lossing it all" if my risk is $200 and my max gain is $40 that is a 1/5 - win/risk ratio and some short call spreads have such a rediculously high probability of staying below certain strikes that it's really not a risk at all... and ontop of that I can protect it. Someone before said I could be assigned and lose all the equity I tied up within the trade... how is that true if the trade is a spread... it's a protected trade, is it not?
Definitely it's the broker. Please ask by calling (or check yourself) if their platform has a covered call button or function. Thus it recognizes the call as covered instead of naked (which requires margin). It also makes order entry easier/quicker.
Yes, it's protected, but 'you can lose all the equity tied up in the trade.' That's not the same as losisng all your equity. But, that has nothing to do with being assigned. If you sell a spread for $40, you can lose $210, or $460 etc, depending on how far apart the strikes are. By the way, if you can collect some premium for selling the call sprad, there is no such thing as 'no risk.' Mark
BS? LOL. The Federal Reserve Board sets forth margin rules under Reg T. The short answer (5 pages later) is that you can't do spreads in a cash account. Deal with it.
lol you don't have a clue what you're talking about. first off, the SEC not FRB governs reg-t rules. secondly, you can sell spreads in a cash account, subject to some restrictions. reg-t does not prohibit it. it's obviously his broker.