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Are We Using Margin? - Jul 30, 2021 | WDIS: Two Yutes - Beginner Options Trading
Tom explains that while the yutes both have what are called “margin accounts,” they’d only be able to use margin for stocks--not options, futures, or options on futures.
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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      WDIS: Two Yutes - Beginner Options Trading

      Are We Using Margin?

      Jul 30, 2021

      In the midst of their usual 21 days-to-expiration rolling, adjusting, and closing, the yutes ask Tom about how margin works. 

      He explains that neither of them have been using margin. While everyone’s required to have what’s called a “margin account” in order to trade futures and options, you can’t actually borrow money to trade options, futures, or options on futures. The money put aside for these trades (buying power reduction) just comes from your own money that you put into your own account in the first place.

      What you CAN do is use margin to buy stocks. Whatever remaining option buying power you have, you have twice that amount available to you for stock buying power. Remember though: half of this money the brokerage has lent to you to go long these stocks. If you ever leave the brokerage, you’ll have to make good on that original margined amount.

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