Question about trading opts diagonal spreads

T

traderwald

Hi guys,

I have a question about a scenario when trading opts diagonal spreads.

If I have the below spread:

Short 1 put contract at strike price 100 for Jan 10 2020
Long 1 put contract at strike price 90 for Dec 10 2019

What happens when both the contracts are ITM on Dec 10 2019 when the long contract is closed ?

Does it simply require increased margin on the open position ?

Thank you
 
I have been heard that your broker will treat the short position as naked for the entire duration of the trade. As long as the short option has a longer duration than the long, the long will not serve to reduce margin at all. Someone else please confirm.
 
Yes short time spreads have a high margin requirement. The only way around this is with a Portfolio margin account.
 
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