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Question:

I'm familiar with the mechanics of options and short them for spare change. I write puts on stocks that I'd own and write covered calls.

I've never dabbled with spreads though. My question is what's the impact of a spread on your available trading balance (TDAmeritrade calls it "options buying power")? My account is marginable and fully invested in a few stocks and an S&P 500 tracker ETF. If assigned, I'll role funds out of the ETF to cover the purchase.

Naturally, that options margin ("buying power") is a percentage of the holdings, and it goes down proportionally with the obligation associated with the option. A short put for $25,000 worth of XYZ @ 250 drops it $25,000.

My question is how will a spread impact that available options fund? If that same trade is set up as a 250/240 put spread will that reduce the marginable balance by $25,000 for the short leg or by $1000, the net difference on the spread?

Thx
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My question is how will a spread impact that available options fund? If that same trade is set up as a 250/240 put spread will that reduce the marginable balance by $25,000 for the short leg or by $1000, the net difference on the spread?

My TDAmeritrade account is tax advantaged so I can't double check their calculations for a marginable account but it should only register as $1000.

-Daniel
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Daniel,

Thanks for the reply. Very helpful.

I'm experimenting with some small trades; trying to expand the toolkit if you will.

Have a great day,

Peter
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