ExamFinch.com My Study

Study guide

1.3 Options Margin Requirements

Practice this exam

Series 9 General Securities Sales Supervisor - Options

Track your progress as you read

Finished sections get a check mark.

1 Introduction

About the Series 9 How to Use This Guide

2 Chapter 1: Supervising Customer Options Accounts

1.1 Options Account Opening Requirements 1.2 Options Suitability Assessment 1.3 Options Margin Requirements 1.4 Options Account Maintenance

3 Chapter 2: Supervising Sales Practices & Trading

2.1 Options Order Supervision 2.2 Trading Activity Review 2.3 Trade Error Handling 2.4 Compliance Monitoring

4 Chapter 3: Supervising Options Communications

3.1 Options Communication Categories 3.2 Options Advertising Review 3.3 Options Sales Literature Review

5 Chapter 4: Personnel Management & Supervision

4.1 Registration Requirements 4.2 Hiring and Onboarding 4.3 Disciplinary Procedures 4.4 Customer Complaint Handling

1.3 Options Margin Requirements

Key Takeaways Explain This Topic AI

Long options are not marginable: 100% of the premium must be paid because the value can go to zero.

Naked equity option margin is the GREATER of a 20%-of-stock method less out-of-the-money amount, or a 10% minimum method.

Covered calls require only the underlying stock's margin; cash-secured puts require the full strike value in cash.

Spread margin equals the maximum loss: net debit for debit spreads, strike difference minus net credit for credit spreads.

Reg T payment is due promptly (T+1 industry practice), and the supervisor monitors and acts on deficiencies daily.

Last updated: June 2026

Regulation T and the Long-Option Rule

Regulation T (Reg T) of the Federal Reserve Board governs the initial extension of credit; the exchanges (Cboe/FINRA) set maintenance margin. The first rule to memorize: long options must be paid in full — 100% of the premium. No credit is extended because an option can expire worthless, leaving no collateral. This differs from marginable stock, where Reg T allows 50% credit.

Exam trap: A long option with more than 9 months to expiration on a listed equity was historically marginable at 75%; the testable default the exam wants is 100% (full payment) for standard listed options.

Margin on Naked (Uncovered) Equity Options

Uncovered writers face open-ended risk, so margin is the greater of two computations:

  • Method Formula
  • Method 1 (standard) Premium + 20% of underlying value − out-of-the-money amount
  • Method 2 (minimum) Premium + 10% of underlying value

Take the larger result. The 10% floor prevents a deep out-of-the-money option from requiring almost nothing.

Worked Example — Naked Call

Write 1 uncovered call, premium $5, stock at $50, strike $50 (at-the-money):

  • Method 1: $500 + (20% × $5,000 = $1,000) − $0 OTM = $1,500
  • Method 2: $500 + (10% × $5,000 = $500) = $1,000
  • Requirement = greater = $1,500
  • Worked Example — Out-of-the-Money Naked Call

Write 1 call, premium $2, stock at $50, strike $60 ($10 OTM):

  • Method 1: $200 + $1,000 − $1,000 OTM = $200
  • Method 2: $200 + $500 = $700
  • Requirement = greater = $700 (the 10% floor binds)
  • Covered and Cash-Secured Positions
  • Position Requirement
  • Covered call (own the stock) Margin on the stock only ; the short call adds nothing
  • Cash-secured put Full strike value in cash (50 put = $5,000)

A covered call writer's downside is the stock's, not the option's, so the call is fully collateralized by the shares deliverable on assignment.

Spread Margin Equals Maximum Loss

Spreads have defined risk, so margin equals that risk. The long leg must expire on or after the short leg to qualify for spread treatment.

  • Spread Margin required
  • Debit spread (bull call / bear put) The net debit paid (that is the max loss)
  • Credit spread (bull put / bear call) Strike difference − net credit received

Worked credit spread: Sell 50 put / buy 45 put for a $2 net credit. Strike difference = $5 = $500; margin = $500 − $200 = $300 , the maximum loss.

Supervisor Margin Duties

Review daily margin/exception reports across all accounts.

Issue a margin call when equity falls below the maintenance minimum.

Track the customer's deposit deadline (Reg T payment is generally due T+1 under current industry practice; a Reg T extension may be requested).

Order liquidation if the call is not met.

Exam trap: A long option cannot satisfy a margin call as collateral — it has no loan value.

Maintenance Margin vs. Initial Margin

Reg T sets the initial requirement; the exchanges and FINRA Rule 4210 set maintenance . For a naked equity option writer, the maintenance computation re-runs the same greater-of formula each day using the current stock price, so a rising stock against a short call steadily increases the requirement and can generate a maintenance margin call even though nothing was traded.

  • Concept Set by Timing
  • Initial margin Federal Reserve (Reg T) When the position is opened
  • Maintenance margin Exchanges / FINRA 4210 Daily, on current values
  • Margin call The firm When equity falls below maintenance
  • Straddles and Combinations

A short straddle (short call + short put, same strike) or short combination (different strikes) is margined on the greater of the two naked sides, plus the premium of the other side . You do not add two full naked requirements together.

Worked short straddle: Short 1 call and short 1 put, both struck $50, stock $50, each premium $4. Naked-call requirement (ATM) = $400 + $1,000 = $1,400; naked-put requirement = $400 + $1,000 = $1,400. Margin = greater side ($1,400) + the other side's premium ($400) = $1,800 .

Supervisor Calculation Checklist

Identify the position type — long, naked, covered, spread, or straddle — because each has a distinct rule.

For naked equity options, run both the 20% method and the 10% floor and take the greater .

For spreads, confirm the long leg expires on or after the short leg, then use net debit or strike-difference-minus-credit.

For straddles, use the larger naked side plus the smaller side's premium.

Compare account equity to the requirement daily and issue calls on deficiencies.

Reg T Payment, Extensions, and Liquidation

  • Step Detail
  • Payment due Promptly; current industry practice is T+1
  • Extension Firm may request a Reg T extension from its DEA/FINRA
  • Frozen account 90-day cash-up-front penalty for repeated Reg T violations
  • Liquidation Firm sells to cover if the call is not met

Exam trap: When a cash-account customer sells securities before paying for an earlier purchase (a free-ride), the account is frozen for 90 days , requiring cash up front before any buy. This is a recurring Series 9 supervisory fact even though it is not options-specific.