What are the Maintenance Requirements for Index Options?
Long Index Options: The buyer of a long index option must pay 100% of the purchase price of the options contract. Regulation T and maintenance requirements are both 100%.
Index Spreads and Straddles: The margin requirements to create spreads and straddles are computed in the same manner as those for equity options.
Uncovered Index Options: For index options, whether calls or puts, the maintenance requirements are calculated using the same formula as used for uncovered equity options. The initial deposit and maintenance requirements must equal 20% of the current index value minus the out-of-the-money amount, if any, plus the premium amount received. This amount must meet or exceed a minimum amount equal to 10% of the current index value times the index multiplier, plus the option’s market value.
Scenario
Client sells 10 October 205 calls for $5.25
Example 1
Example 2
In this scenario, the maintenance requirement for the short call would be $21,055 because it is the greater requirement of the two formulas.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Spreads, Straddles, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades.