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  • Margin Requirements Question 1

    September 3, 2009 by  
    Filed under Margin Requirements

    Q: I noticed that in the video mod4 trade selection IWM, the margin required before the trade is filled is $488. As soon as the order is filled, the margin requirement drops to zero. Can you please explain how this happens.

    A: I haven’t reviewed the video you refer to but I believe this is the reason:

    Long options do not have margin requirements – you purchase them – so when the analyze tab shows $488 ‘margin’ it’s not actually margin but a reduction in buying power instead.

    That’s why after the trade is placed you do not see a margin
    – it goes into your account and the your buying power is reduced by the cost of the option.

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