How to Calculate Margin Requirements for Option Strategies

We support the following options strategies for margin calculation. All other strategies will be treated as single-leg positions for margin calculations. Please be aware of potential margin risks.

1. Covered Call

1.1 Strategy composition

Long stock and short call, where the long stock quantity equals the call contract size.

1.2 Margin

Min(Long stock market value, Max[Short call extrinsic value × 1.1, Min(Underlying price, Short call strike) × Contract size × Long stock margin ratio])

1.3 Buying power calculation

1. When you place an options strategy order to open a covered call, buying power used is calculated as the margin from the formula above, minus the estimated premium received, plus estimated trading fees.

2. If you hold enough shares of the underlying stock and the legs can be paired as a strategy, buying power for the pending short call is frozen based on the reduced margin after combination relief.

3. The in-the-money amount of the covered call is not included in the margin, but it is frozen against your account's Equity with Loan Value (ELV) and buying power.

Note:

1. If no margin relief is applied, you may not hold enough shares of the underlying stock, or you may be closing the corresponding stock position.

2. Margin requirements and the required buying power may be adjusted based on market conditions without prior notice.

3. When you trade highly volatile long-dated options (such as LEAPS), the "short call extrinsic value × 1.1" component may be higher than the latter component (that is, Min(underlying price, short call strike) × contract size × long stock initial margin ratio).

2. Covered Put

2.1 Definition

Short Stock+Short Put, and the quantity of the underlying stock is same as the contract size of the put option

2.2 Margin Requirement

Short Stock Margin + In-The-Money Amount of Short Put 

2.3 Buying Power Requirement

• If you open a covered put position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula;

• If you hold the short position of the underlying stock and then sell to open an out-of-the-money put option by placing a single-leg option order, the single-leg option order will also apply the margin reduction with no buying power Requirement.

• If you hold the short position of the underlying stock and then sell to open an in-the-money put option by placing a single-leg option order, the single-leg option order will also apply the margin reduction and release an amount of buying power after the order submitted.

Note: If no margin reduction is applied, it may be caused by your holding insufficient shares or the operation of closing position in the underlying stock.

3. Vertical Spread

3.1 Definition

• Vertical Call Spread: Long Call + Short Call (same expiration date, same underlying stock, same contract size)

• Vertical Put Spread: Long Put + Short Put (same expiration date, same underlying stock, same contract size)

3.2 Margin Requirement

• Vertical Call Spread: Market Value of Long Call + Max(Long Call Strike – Short Call Strike, 0) X Contract Size

• Vertical Put Spread: Market Value of Long Put + Max(Short Put Strike – Long Put Strike, 0) X Contract Size

3.3 Buying Power Requirement

• If you open a vertical spread position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula;

• If you hold a long position of call(put) and then sell to open a call(put) with a higher(lower) strike price, the short sell order of call(put) will also apply the margin reduction with no buying power required;

• If you hold a long position of call(put) and then sell to open a call(put) with a lower(higher) strike price, the short sell order of call(put) will also apply the margin reduction and release an amount of buying power after the order submitted;

Note:

If no margin reduction is applied, it may be caused by your holding insufficient long options, your operation of closing the long option position, or a different contract size.

4. Straddle

4.1 Definition

• Long Straddle: Long Call + Long Put (same expiration date, same strike price, same underlying stock, same contract size)

• Short Straddle: Short Call + Short Put (same expiration date, same strike price, same underlying stock, same contract size)

4.2 Margin Requirement

• Long Straddle: Market Value of Long Call + Market Value of Long Put

• Short Straddle: Max (Short Call Margin, Short Put Margin)

4.3 Buying Power Requirement

If you open a straddle position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula.

5. Strangle

5.1 Definition

• Long Strangle: Long Call + Long Put (same expiration date, same underlying stock, same contract size, Put Strike < Call Strike)

• Short Strangle: Short Call + Short Put (same expiration date, same underlying stock, same contract size, Put Strike < Call Strike)

5.2 Margin Requirement

• Long Strangle: Market Value of Long Call + Market Value of Long Put

• Short Strangle: Max (Short Call Margin, Short Put Margin)

5.3 Buying Power Requirement

If you open a strangle position by placing a two-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula.

6. Collar

6.1 Definition

• Long Collar: Long Stock + Long Put + Short Call (same expiration date, same underlying stock, Put Strike < Call Strike);

• Short Collar: Short Stock + Short Put + Long Call (same expiration date, same underlying stock, Put Strike < Call Strike);

6.2 Margin Requirement

• Long Collar: Long Stock Margin + Market Value of Long Put 

• Short Collar: Short Stock Margin + Market Value of Long Call + In-The-Money Amount of Short Put

6.3 Buying Power Requirement

If you open a collar position by placing a three-leg order, the buying power required will be the trading fees plus the amount of margin calculated using the above formula;

Note: If no margin reduction is applied, it may be caused by your holding insufficient shares or your operation of closing position in the underlying stock.

7. Butterfly

7.1 Definition

Consists of 4 option contracts with 3 different strike prices.

All contracts must have the same expiration date, underlying asset, and contract size.

1. Call Butterfly

     • Long Call Butterfly: Going long a call butterfly, the trader buys a call of a low strike, sells two calls of a middle strike, and buys a call of a high strike.

     • Short Call Butterfly: Going short a call butterfly, the trader sells a call of a low strike, buys two calls of a middle strike, and sells a call of a high strike.

2. Put Butterfly

     • Long Put Butterfly: Going long a put butterfly, the trader buys a put of a low strike, sells two puts of a middle strike, and buys a put of a high strike.

     • Short Put Butterfly: Going short a put butterfly, the trader sells a put of a low strike, buys two puts of a middle strike, and sells a put of a high strike.

7.2 Margin Requirement 

1. Call Butterfly

     • Long Call Butterfly: Max[0, (high strike - middle strike) - (middle strike - low strike)] × contract size

     • Short Call Butterfly: (middle strike - low strike) × contract size

2. Put Butterfly

     • Long Put Butterfly: Max[0, (middle strike - low strike) - (high strike - middle strike)] × contract size

     • Short Put Butterfly: (high strike - middle strike) × contract size

    

7.3 Buying Power Requirement

When opening a butterfly options position, the buying power requirement is calculated by taking the margin derived from the above formula, subtracting the expected net premium received (or adding the net premium paid), and then adding estimated trading fees.

Notes

1. If no margin reduction is applied, it may be caused by your holding insufficient long options, your operation of closing the long option position, or a different contract size.

2. Margin and buying power requirements may be adjusted based on market conditions without prior notice.

8. Condor

8.1 Definition

Consists of 4 option contracts with 4 different strike prices. All contracts must have the same expiration date, underlying asset, and contract size.

1. Call Condor

     • Long Call Condor: Going long a call condor, the trader buys a call of the lowest strike, sells a call of the second lowest strike, sells a call of the second highest strike, and buys a call of the highest strike.

     • Short Call Condor: Going short a call condor, the trader sells a call of the lowest strike, buys a call of the second lowest strike, buys a call of the second highest strike, and sells a call of the highest strike.

2. Put Condor

     • Long Put Condor: Going long a put condor, the trader buys a put of the lowest strike, sells a put of the second lowest strike, sells a put of the second highest strike, and buys a put of the highest strike.

     • Short Put Condor: Going short a put condor, the trader sells a put of the lowest strike, buys a put of the second lowest strike, buys a put of the second highest strike, and sells a put of the highest strike.

    

8.2 Margin Requirement

1. Call Condor

     • Long Call Condor: Max[0, (highest strike - second highest strike) - (second lowest strike - lowest strike)] × contract size

     • Short Call Condor: (second lowest strike - lowest strike) × contract size

2. Put Condor

     • Long Put Condor: Max[0, (second lowest strike - lowest strike) - (highest strike - second highest strike)] × contract size

     • Short Put Condor: (highest strike - second highest strike) × contract size

    

8.3 Buying Power Requirement

When opening a condor options position, the buying power requirement is calculated by taking the margin derived from the above formulas, subtracting the expected net premium received (or adding the net premium paid), and then adding estimated trading fees.

Notes

1. If no margin reduction is applied, it may be caused by your holding insufficient long options, your operation of closing the long option position, or a different contract size.

2. Margin and buying power requirements may be adjusted based on market conditions without prior notice.

9. Iron Butterfly

9.1 Definition

Consists of 4 option contracts with 3 different strike prices. All contracts must have the same expiration date, underlying asset, and contract size.

1. Long Iron Butterfly: Going long an iron butterfly, the trader sells a put of a low strike, buys a put of a middle strike, buys a call of a middle strike, and sells a call of a high strike.

2. Short Iron Butterfly: Going short an iron butterfly, the trader buys a put of a low strike, sells a put of a middle strike, sells a call of a middle strike, and buys a call of a high strike.

9.2 Margin Requirement

1. Long Iron Butterfly: 0

2. Short Iron Butterfly: Max[(short put strike - long put strike), (long call strike - short call strike)] × contract size

9.3 Buying Power Requirement

When opening an iron butterfly position, the buying power requirement is calculated by taking the margin derived from the above formula, subtracting the expected net premium received (or adding the net premium paid), and then adding estimated trading fees.

Notes

1. If no margin reduction is applied, it may be caused by your holding insufficient long options, your operation of closing the long option position, or a different contract size.

2. Margin and buying power requirements may be adjusted based on market conditions without prior notice.

10. Iron Condor

10.1 Definition

Consists of 4 option contracts with 4 different strike prices. All contracts must have the same expiration date, underlying asset, and contract size.

1. Long Iron Condor: Going long an iron condor, the trader sells a put of the lowest strike, buys a put of the second lowest strike, buys a call of the second highest strike, and sells a call of the highest strike.

2. Short Iron Condor: Going short an iron condor, the trader buys a put of the lowest strike, sells a put of the second lowest strike, sells a call of the second highest strike, and buys a call of the highest strike.

10.2 Margin Requirement

1. Long Iron Condor: 0

2. Short Iron Condor: Max[(short put strike - long put strike), (long call strike - short call strike)] × contract size

10.3 Buying Power Requirement

When opening an iron condor position, the buying power requirement is calculated by taking the margin derived from the above formula, subtracting the expected net premium received (or adding the net premium paid), and then adding estimated trading fees.

Notes

1. If no margin reduction is applied, it may be caused by your holding insufficient long options, your operation of closing the long option position, or a different contract size.

2. Margin and buying power requirements may be adjusted based on market conditions without prior notice.

11. Protective Call

11.1 Definition

A strategy where you hold a short stock position with a long call option. The number of shorted shares must match the call option contract size.

11.2 Margin Requirement

Initial Margin

The standard initial margin required for the short stock position.

Maintenance Margin

The lower of the following:

1. 10% of the call strike price + the out-of-the-money (OTM) amount; or

2. The standard maintenance margin for the short stock position.

11.3 Buying Power

When opening a position with this strategy, you'll need to pay the option premium. This premium is not included in the margin calculation.

Please note:

• Margin Relief: If the margin requirement is not reduced as expected, please verify that you hold sufficient short shares and call options, and that there are no pending orders to close these positions.

• Market Volatility: Margin requirements and buying power are subject to change based on market conditions without prior notice.

12. Protective Put

12.1 Definition

A strategy where you hold a long stock position with a long put option. The number of shares held must match the put option contract size.

12.2 Margin Requirement

Initial Margin

The standard initial margin required for the long stock position.

Maintenance Margin

The lower of the following:

1. 10% of the put strike price + the out-of-the-money (OTM) amount; or

2. The standard maintenance margin for the long stock position.

12.3 Buying Power

When opening a position with this strategy, you'll need to pay the option premium. This premium is not included in the margin calculation.

Please note:

• Margin Relief: If the margin requirement is not reduced as expected, please verify that you hold sufficient shares and put options, and that there are no pending orders to close these positions.

• Market Volatility: Margin requirements and buying power are subject to change based on market conditions without prior notice.