Just when we thought it was confusing enough selling something we “don’t own” using options, how do we know when our cash balance is increased or decreased? Today, we’ll break down all the ways your cash balance can fluctuate.

Before we dive in though, let’s see where we can view our portfolio’s cash balance.

Desktop Platform:

Click the blue “Balances”  drop down menu located immediately to the right of your account number.

Web-based Platform:

Head to the Portfolio tab . If you have your risk profile chart displayed, then you'll need to collapse it. Your portfolio's cash balance is visible once collapsed.

Buying Options or Stocks

Possibly the simplest concept of how your portfolio’s cash balance will decrease is by purchasing stock, purchasing options (outright), or purchasing debit spreads (verticals).

Examples (Gross, not including commissions & fees):

Long 100 shares @ $50 = Cash balance decreased by $5,000

Buy 10 calls on XYZ @ $1.00 = Cash balance decreased by $1,000 ($1.00 x 100 options multiplier x 10 qty)

Debit spread (1-lot) - Buy XYZ 55 call @ $2 and Sell XYZ 60 call @ $1 = Cash balance decreased by $100 ($2 - $1 = $1.00 x 100 options multiplier = $100).

Short Options or Stocks

Generally speaking, when you sell something you receive money for it. Well, that same concept carries over into the world of trading. Whenever you short stock, sell options, or sell credit spreads your account will receive cash in return.

Examples (Gross, not including commissions & fees):

Short 100 shares @ $50 = Cash balance increased by $5,000

Short 1 put on XYZ @ $1.00 = Cash balance increased by $100

Credit spread (1-lot) - Sell XYZ 45 put @ $3 and Buy 40 put @ $1 = Cash balance increased by $200 ($3 - $1 = $2.00 x 100 options multiplier = $200).

One frequently asked question is: what happens when you have an account that is assigned short stock from a short call? We all know that the only way to close out a short stock position is by buying it back, or a buy to close order. That said, how can we purchase an assigned short stock position if the portfolio’s Net Liq is substantially less than the cost to buy back the stock? Well, if you check your cash balance then you’ll notice that the proceeds (money) from the short stock position reflected in your cash balance.

On the other hand, if you are assigned long stock from a short put, and you know that your account cannot sustain the assignment then chances are (aside from the margin call) your account will be margining securities if the assignment is not managed the day after assignment.

How do we find out whether or not your account is margining securities (borrowing money to long stock)? The same way by looking up our portfolio’s cash balance. To learn more click here.