Just want to share my experience with this unreasonable policy by Australia Clearing House (ACH) related to covered call a.k.a buy-write or "share renting"
You will not believe this:
- I did covered call on OZL for Dec 08 expiry on late November
- Early December , as we know, OZL request to suspend their securities pending some refinancing issue
- Several days later I got margin call for my broker requesting to deposit cash margin despite I have 100% coverage on the call option with OZL own stock.
It's covered call: I have covered it with the stock itself (OZL stock for OZL option), why I should still deposit some cash margin? I cannot figure out any possible explanation except ACH does not know what they are doing. The cash margin is just to make sure the writer can buy the stock at market and sell it cheaper (hence making a loss) in case of exercise, but if I have the stock already - end of story, right? What do you think ?
Frankly, I thought firstly that this is just the broker playing up. But after they provide me with ACH formal notice and received 'release from cover' letter then I realize it's not the broker...
What do you guys think ? Is it me drinking too much or ACH is to blame ?
(I have the summary of the incident on this post should you want to have a look a bit further detail)