Let's say I am long stock, long puts, delta hedged 1 or very close (or short stock, long calls.) The stock spikes or collapses overnight. Any risk of a margin call? (More specifically, what I mean is there any chance a change in the stock prices in the pre and after market will lead to a margin call but the option prices won't change along with the stock, if that makes sense?)
How Hedged Am I in the Pre-and After-Market Hours?
- Thread starter eleuthera
- Start date
Well... it shouldn't... but, it probably depends on your broker. I would ask them if I were you, who is your broker?
I've had some issues with Interactive Brokers recently, where I had plenty of funds but for some reason after hours trading messed things up... and I got margin violations, even when I didn't have a position anymore... and after 3 days (3 margin violations) I could only close positions... which I didn't even have...
All sorted out now.
So... best to check with the broker.
Also, if you have some things in writing... like when they say "even if you get margin warnings, we won't liquidate immediately and we will first look at total position and funds"... that way you've got some kinda fall back position when they actually do liquidate and you might be able to recover some...
I've had some issues with Interactive Brokers recently, where I had plenty of funds but for some reason after hours trading messed things up... and I got margin violations, even when I didn't have a position anymore... and after 3 days (3 margin violations) I could only close positions... which I didn't even have...
All sorted out now.
So... best to check with the broker.
Also, if you have some things in writing... like when they say "even if you get margin warnings, we won't liquidate immediately and we will first look at total position and funds"... that way you've got some kinda fall back position when they actually do liquidate and you might be able to recover some...
It does depend on your broker. The brokers risk management policies will have to factor in unrealized profits and losses when in the same account or a linked account. See advice above, talk to your broker. A possible alternative if you do not like your brokers answer is to convert your position to a synthetic position. That way it is a singular option position in the eyes of the broker. This may or may not be practical for you depending on your exact situation.
Minimum margin maintenance level for equities is 25% (brokers can require somewhat higher) so you have a lot of buffer against underlying price movement.
If you have long stock delta hedged at 1.0 then you either own a deep ITM near 100 delta put or more than one lower delta puts. If the stock drops, the worst than can happen is a brokerage computer glitch that fails to recognize the appreciated put(s) (that shouldn't happen) and you get a margin call. In that case, you either STC your put(s) or exercise them.
To be safe, the best thing to do is to contact IB and ask how they handle it.
If you have long stock delta hedged at 1.0 then you either own a deep ITM near 100 delta put or more than one lower delta puts. If the stock drops, the worst than can happen is a brokerage computer glitch that fails to recognize the appreciated put(s) (that shouldn't happen) and you get a margin call. In that case, you either STC your put(s) or exercise them.
To be safe, the best thing to do is to contact IB and ask how they handle it.