Collateral to ensure you can fulfill the obligation if assigned.
If the value of your account equity falls below the Maintenance Margin , your broker will issue a margin call, requiring you to deposit more cash or liquidate positions immediately. buying options on margin
While you often can't use margin to buy the options, you can sometimes use the value of your options as collateral to increase your overall account's Buying Power . The "Two Sides" of Margin Requirements Collateral to ensure you can fulfill the obligation
Options with 9 months or less until expiration cannot be purchased on margin. You must pay 100% of the premium upfront. The "Two Sides" of Margin Requirements Options with
Options with more than 9 months to expiration are often marginable. You may be allowed to borrow up to 25% of the cost, meaning you must put up an initial margin of 75%.
Advanced traders with high account balances (typically over $125k) may qualify for Portfolio Margin , a risk-based system that can significantly lower margin requirements for hedged positions. Margin Buying Power - Firstrade Securities
The term "margin" in options trading refers to two distinct scenarios: Requirement Purpose Buying (Long) Usually 100% of premium (except LEAPS). Payment for the contract. Selling (Short) Varies (Initial + Maintenance).