What Happens If...

Discussion in 'Options' started by rgilbert93, Apr 26, 2010.

  1. You sell a call/put, get assigned, and don't have the money in your account to pay for it? And you don't have a margin account?
     
  2. JPope

    JPope

    Where can you write options without a margin account?
     
  3. OptionsXpress for one... well I assume it's not a margined account. I don't have to keep 2k+ in but it's considered a "level two"..
     
  4. JPope

    JPope

    naked?
     
  5. You get an SEC REG-QK violation and arrested for fraud. (ie: kiting scam)

    (18 U.S.C. § 1344), misapplication (18 U.S.C. § 656), or required entries (18 U.S.C. § 1005). It can draw a fine of up to $1,000,000.00, imprisonment for up to 30 years, or both
     
  6. With the exception of accounts eligible for portfolio margining ... option requirements are meant to avoid a margin call at exercise. So the minimums are set equal to the Reg T minimum for stock. The account has to be a margin account or a cash account with enough cash to secure the strike.
    I believe the level 2 distinction refers to allowed strategies.
     
  7. MTE

    MTE

    To write options you need a margin account. If you don't have it then you cannot write options, even if they are cash secured puts, you still need a margin account.

    To answer you intial question, if you are assigned and don't have enough money to cover the assignement then your broker will issue you a margin call and you would then have to either deposit more cash or close out the position.
     
  8. I just cannot see how he does not have a Margin account and is capable of pulling this trade off.
     
  9. Nothing happens because you can't sell a naked option in a cash account nor can you do it if you have insufficient margin in a margin account nor can you do it with Level II approval since naked writing requires a higher level of approval. All you can do is get replies...
     
  10. Sorry, I realized this earlier today, haha.
     
    #10     Apr 26, 2010