Need help getting started on options

I am new to options and trying to understand the concepts and also how options work on tiger brokers as mine is a small account.

I heard tiger brokers settles stock options in stocks and index options in cash. I just want to understand how things work.

Say, I put up a trade with following legs:

BUY 1x 395.00 CALL (premium = $ 26.43)

SELL 2x 385.00 CALL (premium = $ 30.50)

BUY 1x 375.00 CALL (premium = $36.00)

At the outset, this will be a - $ 143 (-2643+3050+3050-3600). This is a small amount. My small account can afford this.

Q1: Is only 143 taken from the account or is it only settled at expiry or when trade is closed.

Q2: Any other margin requirements to put the trade on?

If at expiry, the price is $ 370 (below all the strikes), then all calls are worthless and you loose $ 143.

If at expiry, the price is $ 400 (above all the strikes), then:

> To realize profit on the 395.00 BUY CALL: I must buy at 395.00 and sell at 400.00 - this means I need $ 39,500 in my account

> The 2x 385.00 SELL CALL is a losing trade: The buyer will exercise and I have to BUY at 400 and sell at 385 to realize the loss - I need $ 80,000 in my account for this.

> To realize profit on the 375.00 BUY CALL: I must buy at 375.00 and sell at 400.00 - this means I need $ 37,500 in my account.

To close this trade (settlement in stocks) - I need 39,500 + 80,000 + 37,500 - $ 157,000 in my account.

This type of settlement put most options trade out of my reach.

Is INDEX OPTIONS a better way for small account?

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Comments

LMSunshine
01:58
LMSunshine
Be careful and don’t be 🔥 Suggest you using the demo account to trade and be very sure of how you’re using options. You’re doing somethinh rather complicated given that you’re new to options😅 Have a blessed year ahead🌈
o4hc
01:29
o4hc
You know most people lose money on these, right? Don’t believe the influencers!