Margin requirements for a short vertical credit spread
Only margin accounts may trade call or put spreads
The margin requirement for short (credit) vertical spreads is equal to the difference between the strikes multiplied by the number of spreads. The credit received from the spread may apply to the margin requirement.
Cash accounts cannot trade vertical spreads. To learn more about account types, levels, and permissible strategies, please click here.
Short (credit) spread example in a margin account
For example, to open the following spread, you would need $65 in your account (the margin requirement less the credit received).
- Sell to open 1 ABC 100 Call for $1.40
- 1.40 x 1 x 100 = +$140
- Buy to open 1 ABC 101 Call for $1.05
- 1.05 x 1 x 100 = -$105
Margin Requirement: (101 - 100) * 1 * 100 = -$100
Net Credit: $140 - $105 = +$35
BP Effect: -$100 + $35 = -$65