Hi everyone, I'm new to options trading. I noticed that when I sell a bull put or bear call spread at Interactive Brokers, there is a margin impact in the spread's performance profile. For instance, I recently sold the 275/280 bear call spread for the QQQ and there was a margin impact of 500. Hypothetically, if I deposited $2000USD to open a margin account at IB, does that mean I could trade 4 bear call spreads? What does margin impact mean? Thanks
I don't use IB, so I can't be 100% certain, because that is not a term that has a formal definition in the applicable regs. So different brokers could potentially use the phrase "margin impact" with different meanings. But the spread you described has a max loss of $500 minus whatever credit you receive when entering the position. So it sounds like you have the correct interpretation. Because you could lose up to $500, you are tying up that amount of money, or equity, as long as that position is open. So yes, if you have $2000 in your account, then you could open that position with four contracts on each leg. Margin behaves very differently when it comes to stock and futures. And if you are selling naked calls or cash-secured puts, or ratio spreads (which by definition involves naked short options) the calculations can get really complicated really fast. But for a vertical spread that has a defined maximum loss, it's pretty straightforward.
You got the gist of it. There are a lot of rules and conditions applicable to each customer/account type that could change your margin requirement. Margin Impact is how much that trade could add/subtract from your available margin.
You have: - Initial Margin Requirement (minimum amount that has to be deposited in your account to open transaction) - Maintenance Margin Requirement (amount that has to be in your account at all times) Both parameters are changing all the time, if there is market turmoil, requirements are going to be higher. If your Net Liquidation Value < Maintenance Margin Requirement ...you will get Margin Call from your broker (they will sell some of your assets). Margin Impact is how these Margin Requirements are affected. Before making transaction you can always check what will happen, just click on Check Margin button and you can see the difference.