Option Strategies - Reg T Margin

Options investors benefit greatly under Portfolio Margin as the margin requirements are significantly lower than they are under Reg T.  
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To understand how options are treated under portfolio margin it's useful to first review the treatment of options under Reg T. Keep in mind that many brokerage firms apply more stringent house margin rules so the margin may vary slightly from broker to broker. The information presented in this article is for listed options only.

If you are ever in doubt about the margin requirements, The Options Clearing Corporation publishes a very handy options margin calculator here. 

Reg T Margin  
Long Call or Long Put
There is no beneficial treatment under Reg T unless the option has more than 9 months until expiry. 
  • Less than 9 months until expiry: The entire option premium must be posted to the margin account in order to establish the position. 
  • More than 9 months until expiry: 75% of the option premium must be posted to the margin account in order to establish the position. After the position is established, the maintenance margin is also 75%.  

Covered Call
A call is considered "covered" either by owning the underlying security or by owning an option with a lower exercise price and the same (or longer) expiration date.
  • The short call obtains beneficial margin treatment under Reg T. No additional margin will need to be posted in order to establish the position.
  • A short call covered by another call option with a higher exercise price must have 100% of the difference in exercise prices posted to the account.  

Uncovered Call (i.e. Naked Call)
  • A short in-the-money (or at-the-money) call: 100% of the option market value plus 15% of the underlying price for Broad Based Indexes or 20% for Equities and Narrow Based Indexes.
  • A short out-of-the-money call must have an amount posted into the account equal to the maximum of: 1) 100% of the option market value plus 10% of the underlying price   or   2) 100% of the option market value plus 20% (or 15% for Broad Based Indexes) of the underlying price minus 100% the out-of-the-money amount.

Covered Put
A put is considered "covered" by any of the following: 1) having cash in your account equal to the total exercise price  or  2) by having a short position in the underlying security  or  3) by owning a put option with a higher exercise price and the same (or longer) expiration date.
  • The short put obtains beneficial margin treatment under Reg T. No additional margin will need to be posted in order to establish the position.  

Uncovered Puts (i.e. Naked Puts) 
  • A short in-the-money (or at-the-money) put must have 100% of the option market value plus 15% of the underlying price for Broad Based Indexes or 20% for Equities and Narrow Based Indexes.
  • A short out-of-the-money put must have an amount posted into the account equal to the maximum of: 1) 100% of the option market value plus 10% of the underlying price   or   2) 100% of the received premium plus 20% (or 15% for Broad Based Indexes) of the underlying price minus 100% the out-of-the-money amount.

Short Put and Short Call on the same underlying (i.e. Short Straddle)
  • The maximum of:  1) short put margin requirement  2) short call margin requirement  plus the option market value of the other side.
In addition to the above, other more complex option strategies have their own specific margin requirements. See the CBOE's Margin Manual below for more details.