Index Options Margin requirements

1. Margin Requirements for Index Options Strategies

2. Special Margin Requirements for Spread

3. Special Margin Requirements for VIX Options Strategies

1. Margin Requirements for Index Options Strategies

The follow strategies are eligible for margin requirement reductions：

• Vertical Spread

• Short Straddle

• Short Strangle

• Butterfly

• Condor

• Iron Butterfly

• Iron Condor

• Long Calendar Spread

• Long Diagonal Spread

The rules on margin requirement reductions are the same for index and stock options. For more information, refer to the help article "Margin Requirements for Options Strategies".

Note: Options trading subject to eligibility requirements. Strategies available will depend on options level approved.

2. Special Margin Requirements for Spread

2.1 Special Margin Requirements for Calendar Spreads

Calendar spread composition:

• Call calendar spread: a long call and a short call with the same strike, underlying security, and contract size, but different expiration dates.

• Put calendar spread: a long put and a short put with the same strike, underlying security, and contract size, but different expiration dates.

Margin:

• If the long option expires before the short option:

• Call calendar spread: Short call margin

• Put calendar spread: Short put margin

• If the long option expires after the short option:

• Call calendar spread: Min[Short call margin, Risk buffer margin]

• Put calendar spread: Min[Short put margin, Risk buffer margin]

Buying power calculation:

When you place an options strategy order to open a calendar spread, buying power used is calculated as the margin from the formula above, minus the estimated net premium credit (or plus the net premium debit), plus estimated trading fees.

Note:

1. Because European-style options cannot be exercised early, the price of the longer-dated leg may show a time-value inversion relative to the near-term leg. This can happen because of changes in interest rates and the volatility term structure, concentrated dividend payments, or other factors. Therefore, we require additional margin, and you cannot receive the same margin relief as that of American-style stock options.

2. Some index underlyings (such as .CBTX) may have a higher risk buffer margin, which may result in no margin relief.

2.2 Special Margin Requirements for Diagonal Spreads

Diagonal spread composition:

• Call diagonal spread: a long call and a short call with the same underlying security and contract size, but different strikes and expiration dates.

• Put diagonal spread: a long put and a short put with the same underlying security and contract size, but different strikes and expiration dates.

Margin:

• If the long option expires before the short option:

• Call diagonal spread: Short call margin

• Put diagonal spread: Short put margin

• If the long option expires after the short option:

• Call diagonal spread: Min[Short call margin, Risk buffer margin]

• Put diagonal spread: Min[Short put margin, Risk buffer margin]

Buying power calculation:

When you place an options strategy order to open a diagonal spread, buying power used is calculated as the margin from the formula above, minus the estimated net premium credit (or plus the net premium debit), plus estimated trading fees.

Note:

1. Because European-style options cannot be exercised early, the price of the longer-dated leg may show a time-value inversion relative to the near-term leg. This can happen because of changes in interest rates and the volatility term structure, concentrated dividend payments, or other factors. Therefore, we require additional margin, and you cannot receive the same margin relief as that of American-style stock options.

2. Some index underlyings (such as .CBTX) may have a higher risk buffer margin, so margin relief may not be available.

When contracts with closer expiration dates expire, index options will be settled in cash, which may decrease the Equity with Loan Value (ELV) of your account and trigger a potential margin call. 
Before the last trading day's market close of the near-month options, the margin requirement for long calendar and diagonal spreads of index options will be recalculated as if they were single-leg options. As a result, margin reductions will no longer apply.
If a margin call is triggered on your account when the near-month options expire, Moomoo US may liquidate your holdings at any time. 

3. Special Margin Requirements for VIX Options Strategies

Options pricing is determined by the current price and anticipated price movements of the underlying asset. Unlike options on stocks and stock indices, the VIX index option carries distinct risks as it is an index option on volatility.

3.1 VIX Can Change Suddenly and Drastically

The VIX, or Volatility Index, is calculated using options prices, specifically put and call options on the S&P 500 Index. This real-time market index represents the market's expectation of 30-day forward-looking volatility.

When implied volatility is high, the VIX increases correspondingly, potentially reaching very high levels. Conversely, when implied volatility is low, the VIX decreases correspondingly, reaching comparatively lower levels.

Due to the method of calculating the VIX index and its practical implications, various factors can suddenly provoke market panic, causing the VIX index to rise sharply. This means that changes in the index level can be both sudden and drastic, making the market risk for the VIX index higher compared to that of stock indices.

3.2 VIX Options Are Priced Based on VIX Futures

Stock options have tradable underlying assets, and there is hedging and replicability between stock trading and options trading, with stock options priced based on the price of the underlying stock. The underlying index of stock index options is not tradable, but replication of the index through its constituent stocks is possible, meaning stock index trading can be achieved through stock trading. Thus, stock index options are priced based on the price of the underlying index.

The VIX is a volatility index, which itself is not tradable and cannot be replicated. It is primarily traded through VIX futures (VXmain). Therefore, VIX index options are mainly priced based on VIX index futures and are only more influenced by the spot price of the VIX index as they approach expiration. There is a basis difference between the price of VIX futures and the VIX spot price, and there are calendar spreads between VIX futures with different expiration dates. This results in a risk structure for VIX option strategies that is significantly different from that of stock index options strategies.

Taking calendar spreads as an example:

• In the case of a long calendar spread strategy using SPX index options, the prices of both options in the spread are influenced by the SPX index price.

• In the case of a long calendar spread using VIX index options, the prices of both options in the spread are influenced by the VIX index level, but also by the basis differences between the two VIX futures.

• The risk structure of a VIX index option calendar spread is more complex than the same strategy built on SPX.

Due to the unique risk attributes of VIX index options, VIX index options strategies are not eligible for margin requirement reductions. Margin requirements are calculated based on individual positions.