Option margin requirements
Questrade offers standard and advanced option strategies and mini options lots. There are four approval levels for options trading:
- Level 1: long options: long calls and long puts
- Level 2: covered options: covered calls and covered puts
- Level 3: option spreads: call spreads, put spreads, butterflies
- Level 4: naked options: short straddles, strangles, and uncovered naked equity and index options
To change your option level log into myQuestrade, select my platforms then platform management and click update an option level. Registered accounts, including TFSAs, can be approved to buy puts and calls and write covered calls.
To place a Canadian multi-leg option order that includes
- a stock leg, or
- more than two legs
Please contact the trade desk at 1.866.980.9590. The trade desk is available Monday to Friday, 8:30 a.m. to 4:30 p.m. ET.
| Level 1 |
Long calls and long puts |
Minimum $1,000 equity required
100% of the option value (net cost of the trade).
|
| Level 2 |
Covered calls, covered puts |
Minimum $1,000 equity required
Covered calls:
Out of the money call: the normal margin requirement on the underlying interest.
In the money call: the normal margin requirement on the aggregate exercise value, plus call intrinsic value.
Covered puts:
Normal margin requirement on the underlying interest, plus the put premium.
|
| Level 3 |
Spreads, married puts, protected shorts |
Minimum $5,000 equity required
Long (debit) call and put spreads and long (debit) butterflies: 100% of the option spread value (net cost of trade)
Short (credit) call and put spreads and short (credit) butterflies: aggregate exercise value between long and short.
Married put: out of the money put: the lesser of a) normal margin requirement on the stock and b) put market value plus out of the money amount. In the money put: put option extrinsic value.
Protected short: out of the money call: the lesser of a) call market value plus out of the money amount b) normal margin requirement on the underlying interest; in the money call: call option extrinsic value.
|
| Level 4 |
Uncovered (naked) equity options |
Minimum $25,000 equity required
100% of the market value of the premium
PLUS
the greater of:
i) normal margin requirement on the underlying interest less the amount the option is out-of-the-money (if any)
OR
For options listed on a recognized Canadian exchange:
ii) 5% of the market value of underlying stock.
AND
For options listed on a recognized U.S. exchange:
i) 5% of the market value of the underlying stock for calls
OR
ii) 5% of the exercise value of the put option.
|
| Uncovered (naked) index options |
Index options are cash settled and generally have European-style expiry. European-style options can only be exercised on expiry.
Care must be taken when trading these products given the added risk.
For broad-based index options (i.e. S&P 500), the margin requirement on short naked index options is:
100% of the market value of the premium
PLUS
The greater of:
For options listed on a recognized Canadian exchange:
i) 10% x the underlying interest less the amount the option is out-of-the-money (if any)
OR
ii) 2% x the market value of the underlying index value for calls and 2% of the underlying exercise value for puts.
|
| |
For options listed on a recognized U.S. exchange:
i) 10% x the underlying interest less the amount the option is out-of-the-money (if any)
OR
ii) 2% of the market value of the underlying stock for calls or 2% of the exercise value of the put option.
|