Option Strategy
Option Strategy refers to a combination of positions in an account with a hedging relationship, typically a combination of options and underlying stocks. Tiger will apply some margin relief to the Option Strategy in consideration of the fact that the option strategy mitigates the relevant risks.
Option Strategy Applicable Scope
Client: The option strategy is only available to clients who meet the corresponding conditions and have opened the option strategy permissions. Please contact customer service for more details.
Symbol: US options and US stocks
Option Strategy Type
Tiger currently offers eighteen option strategies as follows:
Covered Call: A combination of 1 lot short position in a call option and 100 shares long position in the same underlying U.S. stock.
Covered Put: A combination of 1 lot short position in a put option and 100 shares short position in the same underlying U.S. stock.
Call Vertical Spread: A combination of 1 lot short position in a call option and 1 lot long position in a call option. This option strategy can be combined when the call options aforementioned have the same underlying (U.S. stock or index), the same expiration date, and different strike prices.
Put Vertical Spread: A combination of 1 lot short position in a put option and 1 lot long position in a put option. This option strategy can be combined when the put options aforementioned have the same underlying (U.S. stock or index), the same expiration date, and different strike prices.
Short Call and Put: A combination of 1 lot short position in a call option and 1 lot short position in a put option. This option strategy can be combined when both options aforementioned have the same underlying (U.S. stock or index) and the same expiration date. The strike price of put option is equal to or less than the strike price of call option.
Protective Call: A combination of 1 lot long position in a call option and 100 shares short position in the same underlying U.S. stock.
Protective Put: A combination of 1 lot long position in a put option and 100 shares long position in the same underlying U.S. stock.
Call Calendar Spread: A combination of 1 lot long position in a call option and 1 lot short position in a call option. This option strategy can be combined when the call options aforementioned have the same underlying (U.S. stock or index), the strike price can be different. The expiration date of short position is earlier than the expiration date of long position.
Put Calendar Spread: A combination of 1 lot long position in a put option and 1 lot short position in a put option. This option strategy can be combined when the put options aforementioned have the same underlying (U.S. stock or index), the strike price can be different. The expiration date of short position is earlier than the expiration date of long position.
Call Butterfly: It consists of a long position of 1 lot of low-strike call options, 2 short positions of mid-strike call options, and 1 long position of high-strike call options, and the above reverse positions can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the middle strike price minus the low strike price is equal to the high strike price minus the middle strike price.
Put Butterfly: It consists of a long position of 1 lot of a low-strike put option, a short position of 2 lots of an intermediate strike put option, and a long position of 1 lot of a high-strike put option and the above opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the middle strike price minus the low strike price is equal to the high strike price minus the middle strike price.
Iron Butterfly: consists of a short position of 1 lot of a low-strike put option, a long position of 1 lot of a mid-strike call option, a long position of 1 lot of a mid-strike put option, and a short position of 1 lot of a high-strike call option and the above opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the middle strike price minus the low strike price is equal to the high strike price minus the middle strike price.
Call Condor: It consists of a long position of 1 lot of the lowest strike price call option, 1 short position of the lower strike price call option, 1 short position of the higher strike price call option, and 1 long position of the highest strike price call option and the above opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the lower strike price minus the highest strike price is equal to the highest strike price minus the higher strike price.
Put Condor: It consists of a long position of 1 put option with the lowest strike, a short position with a lower strike put option, a short position with a higher strike put option, and a long position with the highest strike put option and the opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the lower strike price minus the highest strike price is equal to the highest strike price minus the higher strike price.
Iron Condor: It consists of a short position of 1 put option with lowest strike, a long position with a lower strike put option, a long position with a higher strike call option, and a long position with a call option with the highest strike price and the opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the lower strike price minus the highest strike price is equal to the highest strike price minus the higher strike price.
Box: It consists of a long position of 1 lot of a low strike call option, a short position of 1 lot of a low strike put option, a short position of 1 lot of a high strike call option, and a long position of 1 lot of the highest strike put option and the opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) and expiration date of the aforementioned options are the same, the low strike price of the call option and put option with the same strike price is the same, and the high strike price of the call option and put option with the same strike price is the same.
Asymmetric box: It consists of a short position of 1 put option with lowest strike, a long position with 1 put option with lower strike, a long position with 1 lot of call option with higher strike, and a short position with 1 lot of call option with highest strike, and the opposite position can also be formed; The composition of the portfolio must meet the following conditions: the underlying (U.S. stock or index) of the aforementioned options has the same expiration date, and the lower strike price minus the highest strike price is not equal to the highest strike price minus the higher strike price.
Custom: You can customize the standard combinations that are not listed above, and the custom combinations can contain the above standard combinations, and the maximum number of legs that support custom options is 4 legs.
Option Strategy Margin
The margin requirements related to option strategy are as follows.
1. If your newly held options or stocks can constitute an option strategy with your existing positions, the margin requirements for the positions in your option strategy may be reduced.
2. If you liquidate part of your position in the option strategy, the option strategy will be invalidated and you will no longer be offered margin relief, which may result in a decrease in the risk value of your account. Please ensure that you have sufficient funds in your account before liquidating your position in the option strategy as a forced liquidation may occur when EL<0.
If you need to liquidate part of your positions in the option strategy, we recommend that you liquidate the option positions in the option strategy first in order to avoid an increase in margin caused by the liquidation action; if you liquidate the stock positions in the option strategy first but only partially filled, it will cause the option strategy to lapse and there will be both option positions and stock positions in your account, thus the sum of the margin of both positions will be higher than the margin requirement of the option strategy, which will increase the margin of your account.
Please note that the option strategies cannot currently be applied to some positions whose relevant symbols or contract multipliers have changed due to corporate actions at present. If a position in the option strategy is subject to such corporate action, this may result in the option strategy invalidating and thus increasing the margin requirement. Please ensure that you have sufficient funds in your account before liquidating your position in the option strategy as a forced liquidation may occur when EL<0.