Spreading v taking an out-right option position
I just sold 20 SPX Sep 1725 Calls for $1.35 for a credit of $2,700 less commission. This uncovered short position has about $350,000 as margin requirement - not a problem in my account, but how do you trade these things in a smaller account with only $50,000 margin value?
You can do it by creating a credit spread right from the start, or by entering the long side first, i.e. buying the 1730 or 1735 Calls before adding the short side of the spread. It will reduce the credit amount to $1 or less ... BUT the margin requirements will also drop quite drastically to under $20,000 from the original $350,000 for the naked call position ...
If you have any questions about options or spread trading strategies in particular, you can talk to me on Skype ... my ID is franto Hruz

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