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Covered call margins

Discussion in 'Derivatives' started by IVX, Mar 11, 2017.

  1. IVX

    IVX

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    Hi all,

    I have just written a covered call with Commsec and have received my ETO Trading statement which shows that I have a margin owing on my open position.

    I did not think that a margin is held on covered calls as the stock is owned by the call seller negating the need for collateral to be held by ASX clear.

    I have spoken to Commsec about this but I think the representative was confused thinking that the call option was sold naked.

    Could someone please shed some light on this for me.

    Cheers
     
  2. Virge666

    Virge666

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    Did you but the stock and then sold the call option against it is a different trade ?

    Or bought the whole thing as a spread... ?

    and lastly - there is NO reason to use ComSec to buy and sell ASX shares and derivatives... you would have to be madder than Mad Jack McMad from Mad university to use ANY Australian broker. Compare with interactive Brokers or a myriad of other clearing houses to do this properly. Saxo is another cheap option I have been told but i hate their software
     
  3. bellenuit

    bellenuit

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    Sorry to piggy back on your post, but I have a not too unrelated question on covered calls, this time in relation to Interactive Brokers.

    I want to write a covered call with IB on a US stock that I already own. I own 100 of the underlying and I want to write one contract. I am just curious about the mechanics of doing it as I haven't ever done this with IB before or with a US stock.

    I went through the process of writing the (covered) call up to the point of placing the order and then cancelled just to see if there was anything there I need to look out for. There wasn't.

    Up to that point it didn't in anyway try to establish a link between the call and the underlying shares I own.

    If I go ahead and place that covered call order through IB, what are the mechanics if the call is exercised and I am assigned. Do IB simply look for 100 shares of the underlying and deliver (sell at the exercise price) to the taker without me having to do anything?

    I am going away for a few weeks and will have limited access to the net, so I don't want to be in a situation where I am obligated to do something (personal involvement) if assigned as I may not be able to do that. Just in case it is relevant, I don't have any margin balance, so there is no possibility of IB doing a margin call on the underlying or anything like that.
     
  4. IVX

    IVX

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    Thanks Virge666. I'll look into some cheaper brokers.
     
  5. cutz

    cutz

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    Hi,
    Its pretty straightforward, if you are assigned on your short calls you will end up with a sell ( underlying ) stock in the morning, these are of course matched out with your long (underlying ) stock position and you will end up with a nil position. It all happens automatically.
     
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