Hello Option Traders,

Could someone please help me understand the situation that happened to me last week? I opened the following “calendar spread” position.

 

SPY stock price is $127.00

September PUT Option: buy to open   10 contracts

                        Strike    symbol         bid    ask

                         106      SWGUB       .02     .05

 

October PUT Option: sell to open   10 contracts

                       Strike     symbol        bid    ask

                        106      SWGVB       .23     .26

 

The next day (Friday) I got a Regulation T Margin Call (Fed Call) & Required Maintenance Margin Call for $17,500. I called Zecco trading team and they were not sure why I got a Margin call, I was told that Zecco would investigate and get back with me. I closed all of my positions immediately with a loss. The next day (Saturday) morning I checked my Zecco account and it was normal, $-17,500 went away.

 

This is the second time it’s happening to me. First time my account (buying power) went to $0, when it wasn’t supposed to, and this is the second time. I am not sure if it’s on Zecco’s side or Penson’s side or if it's normal. If this is a technical glitch, I must say it’s a very expansive and nerve wracking experience to say the least, I hope no one gets to experience similar excitement.  

 

Have similar situations happen to anyone? What did you do to resolve it? Why does it happen, what could cause it? Could someone, who has real life experience trading options, tell me, what are the real chances of being assigned in this situation, when options are far out of the money? If you have any question that you want to ask me, please do.

I greatly appreciate all of the feedback and I hope it helps others as well.

 

Ken

OK, I think I figured out what happened and what I did with this reverse calendar spread.

I had 10 Sep. contracts and once they expired (the long positions); I’d be left with 10 naked short positions for Oct. options. That would suck up all of my buying power and then some. It looks like Zecco’s platform handled it correctly. It seems like it looks at the worst case scenario to protect itself.

Happy Trading.

Ken

If anybody has comments please share.

 

 

ksuslaev:

OK, I think I figured out what happened and what I did with this reverse calendar spread.

I had 10 Sep. contracts and once they expired (the long positions); I’d be left with 10 naked short positions for Oct. options. That would suck up all of my buying power and then some. It looks like Zecco’s platform handled it correctly. It seems like it looks at the worst case scenario to protect itself.

Happy Trading.

Ken

If anybody has comments please share.

My #1 feature request is to show the affect on buying power from the position BEFORE you send the order.  Maybe put it on the Preview screen. 

For many spread trades it's not to hard to figure out the buying power affect, but sometimes it would be nice to just be told what it will be.   Some more complex trades take more calculations to figure out and rather than risk making an error in my calculations, I'd rather the computer let me know before I execute the trade.

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-Sean

Man,  I love Zecco, but just because of the rates.   Other than that, their system sucks.  This has happened to me about 4 times.  I contacted them and they had no clue as to why it happens.  I've heard many excuses, like: "we're doing a system upgrade, and your problem should be cleared by tomorrow", etc....  If I were you I would just wait maybe two days and if it doesn't clear up, then call them again.  I have lost money because of this too, but I learned from the second time, and now I just ignore it and wait for it to clear from my account.

raven21:

..., but I learned from the second time, and now I just ignore it and wait for it to clear from my account.

You are gutsier than I am.  I am too afraid if I wait for it to clear they will say "time is up and now we are going to start liquidating your positions until your account is out of the margin call."   That would be far worse than if I do it myself.  I rather lose some money selling myself than risk someone starting at the top of my portfolio and issuing sell, sell sells.  Yikes!

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-Sean

raven21:

Man,  I love Zecco, but just because of the rates.   Other than that, their system sucks.  This has happened to me about 4 times.  I contacted them and they had no clue as to why it happens.  I've heard many excuses, like: "we're doing a system upgrade, and your problem should be cleared by tomorrow", etc....  If I were you I would just wait maybe two days and if it doesn't clear up, then call them again.  I have lost money because of this too, but I learned from the second time, and now I just ignore it and wait for it to clear from my account.

I want to point out that his original position had  large margin requirements and was not a mistake by Zecco's software.  Depending on his account size his buying power reduction could have been as high as $22,000 on that position.  He did say he reversed the sell/buy in the order which when he did it the other way around had a buying power reduction of around $180. 

So this wasn't Zecco's mistake.

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-Sean

Thanks for feedback. I personally think Zecco is a good company to work with. I have been trading for a few years, ten to be exact, and Zecco is the only company that I know offers option trading without required amount of about $50,000 to trade complex options. I do agree that some things could be better, but I am willing to give Zecco some time to develop a more stable platform. I truly believe that you must know what you are doing in stock market because "unlike God, stock market does not forgive those who not know what they do". What I did with reverse spread was an experiment, I don't think I'll do it again, and I do not recommend it. Thanks.

Ken

ksuslaev:

Thanks for feedback. I personally think Zecco is a good company to work with. I have been trading for a few years, ten to be exact, and Zecco is the only company that I know offers option trading without required amount of about $50,000 to trade complex options. I do agree that some things could be better, but I am willing to give Zecco some time to develop a more stable platform. I truly believe that you must know what you are doing in stock market because "unlike God, stock market does not forgive those who not know what they do". What I did with reverse spread was an experiment, I don't think I'll do it again, and I do not recommend it. Thanks.

Ken

Lots of companies allow complex option trades without having at least $50,000.  Zecco does require that much to sell naked short calls and puts.  

I'm not going to slam Zecco's trading platform because I know they are new to the scene and are working on improving it.   That said, they have a long way to go.  Besides, I don't trade with them for the platform -  I trade with them because their fees are about half that of the nearest discount broker.   So when I do, on average, 40+ options trades and 30+ stock trades per month and I don't need to pay more in fees than I have to.

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-Sean

Sean, your right, I was thinking about naked writing, not spreads.  I agree that fees at Zecco are much less compared to their competition. I hope that when trading platform and overall company matures and becomes more stable fees will not go up.

Ken