Higher margin requirement for naked calls vs call credit spread

Bonta
2023-07-11

I am looking into adding $Estee Lauder(EL)$ calls to form a strangle with my current puts.

I tried to use the vertical function but it only allows $5, whereas I am looking at $10 interval.

Nevertheless, I used custom to form the credit spread.

The margin requirement is usd $4000.

I tried comparing by using naked calls.

Naked calls actually requires lesser margin.

It could be a matter of tiger not being able to cope with Jade lizards (Naked puts pair with call credit spreads) in terms of the assessment of margin, that's what leads to this peculiar situation, whereby the position is safer but requires more margin. 

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Comments

  • TigerPM
    2023-07-12
    TigerPM

    Hey Bonta, thank you for your professional advice. I have already provided feedback to the product team, and I will reply to you once there is a conclusion.

    • BontaReplyTigerPM: 
      Thanks for the clarification. [Victory]
    • TigerPMReplyBonta: 
      Unable to switch to $10 intervals: On the right side of the order button, you will find a toggle button to switch the price interval. Simply click on it to switch. Margin issue: We have reviewed your order history and found that because you previously held a Put option, when you purchased a Call option, it automatically formed a options strategy. Therefore, the margin for the Call option in this case is calculated based on the strategy, rather than as an single leg. As a result, the margin for both examples you mentioned in your message is calculated based on the options strategy rule. There is no higher margin requirement for purchasing a single leg Call compared to an option strategy.But we will optimize our product in the future so that the calculation of option margins is no longer tied to historical positions. Thank you for your feedback! If you have any further questions, please feel free to reach out to us through this topic or the App's Help Center.
    • Bonta: 
      Sure thing. Earnings season is coming, am considering using mix of strangles and jade lizard. [Cool]
  • LeonaClemens
    2023-07-11
    LeonaClemens

    The margin requirement for naked calls is higher than the margin requirement for call credit spreads because naked calls have unlimited risk.

  • Guy
    2023-07-11
    Guy

    With a call credit spread, the seller is short a call option and long another call option with a higher strike price.

  • Agxm
    2023-07-12
    Agxm
    What does the vertical function do?😂i still do every option mannual since i dont get the function.
  • ClarenceNehemiah
    2023-07-11
    ClarenceNehemiah

    It is important to note that these are just the minimum margin requirements.

  • WendyDelia
    2023-07-11
    WendyDelia

    I only like it as a skin care or make up

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