NOOB Option Trader - Have a question about spreads

B

BurtBurton

Hoping you guys can help me out here.....I bought sold a spread that is very far in the money, but don't have cash in my account to cover full settlement. Here are the details:

Bought DRIP $191 Call

Sold DRIP $200 Call

DRIP price $358

Now to me its pretty obvious that both options would be settled, but I'm unsure if Robinhood would liquidate my position tomorrow since I don't have 19k in cash to cover the lower of the two options. Bottom line is there is no liquidity right now because no one is buying options that are $150 below the strike price. I'm hoping I can sell them out tomorrow close to $9. Do I need to deposit 19k to make sure I have enough to cover the lower of the two options?
 
As long as both strikes are ITM you don't need to have the 19k in your account at expiration. They will offset one another and you'll just be credited $900. The only time you'll run into trouble is if one strike goes in the money and the other is not. If that happens the ITM strike will exercise but the other strike expires, leaving you in a margin call for 19k. At least thats how its supposed to work, but no one can predict what Robinhood will choose to do. You really gotta get away from them, free is not always free.
 
Trade Theory said:
If that happens the ITM strike will exercise but the other strike expires, leaving you in a margin call for 19k. At least thats how its supposed to work, but no one can predict what Robinhood will choose to do. You really gotta get away from them, free is not always free.
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At least at most brokers I've been with a spread that is half in the money will use the other half to cover, leaving you with the debit difference. I speculate this is why they have special order tabs for various order types, rather than just allowing you to leg into a spread. But who knows.
 
Trade Theory said:
As long as both strikes are ITM you don't need to have the 19k in your account at expiration. They will offset one another and you'll just be credited $900. The only time you'll run into trouble is if one strike goes in the money and the other is not. If that happens the ITM strike will exercise but the other strike expires, leaving you in a margin call for 19k. At least thats how its supposed to work, but no one can predict what Robinhood will choose to do. You really gotta get away from them, free is not always free.
More...
Yeah....I'm finding that out quickly. Been trying to get in contact with SOMEONE from customer support to no avail. Frustrating to say the least. I have a few accounts across multiple platforms. The reason that Robinhood appealed to me was ironically because of the ability to trade spreads.
 
BurtBurton said:
Hoping you guys can help me out here.....I bought sold a spread that is very far in the money, but don't have cash in my account to cover full settlement. Here are the details:

Bought DRIP $191 Call

Sold DRIP $200 Call

DRIP price $358

Now to me its pretty obvious that both options would be settled, but I'm unsure if Robinhood would liquidate my position tomorrow since I don't have 19k in cash to cover the lower of the two options. Bottom line is there is no liquidity right now because no one is buying options that are $150 below the strike price. I'm hoping I can sell them out tomorrow close to $9. Do I need to deposit 19k to make sure I have enough to cover the lower of the two options?
More...

When do the options expire? if they expire, wouldn't it just net $9/contract at settlement. If anything, option holder has a right to exercise the contracts and settle that way.
 
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