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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
No. of Recommendations: 1
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
No. of Recommendations: 0
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
