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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: taxman who wrote (584)	1/3/2000 4:13:00 PM
From: edamo	Read Replies (2) \| Respond to of 8096

taxman re: "option-al rules" believe it is your brokerage. if the option is the only position, the only rule that holds true is the option is not considered marginable. you cannot borrow against the option as it is not considered secure and tangible. the conversion or exercise is a natural. let's say you have two contracts in which the underlying has doubled. sell one, which generates the cash to exercise the other. now you have a security that can be collateralized fully for margin borrowing. you can in fact, if you so desire use the margin to buy calls or puts or whatever....seems simple to me... if you only hold one contract, that can be reason for dreyfus to ask for an equity position.....

To: taxman who wrote (584)	1/3/2000 4:47:00 PM
From: codawg	Read Replies (1) \| Respond to of 8096

Hi Taxman. Recently, I had a rather large in the money position in MSFT options that I wasn't able to sell at the close on the Friday of expiration. I had nowhere near enough cash in the account to cover the margin requirements. I talked to Schwab and had no problem exercising the options and immediately putting my account into margin debit. The amount they wanted from me was the amount to bring the ACCOUNT EQUITY to 50%. I would not have had to put up any cash if the underlying were double the strike because this would have made my equity 50%. I'm surprised by Dreyfus and Fidelity's position. Incidentally, Schwab let me work the order the following Monday rather than requiring me to sell at or near the open. Co

To: taxman who wrote (584)	1/3/2000 5:41:00 PM
From: t2	Read Replies (1) \| Respond to of 8096

The excercising of options policy probably varies among brokerages. I used to (a couple of years ago--on MSFT)buy options very close to the strike just prior to expiration and would be delivered the shares automatically if these were in the money. I would get an urgent margin call first thing monday morning and i would sell.(Back then i was not an investor but more of a gambler). Neither of my brokerages gave me any trouble. TD Waterhouse and another Canadian online broker Bank Of Montreal investorline never bothered me about the equity/cash prior to excercising. Maybe if one questions the broker, that is when a person can get into trouble---otherwise the option is automatically excercised if 75 cents in the money. I think the brokers just don't follow the rules that strictly sometimes if the rule you mention exists. I don't believe these rules are dictated by the SEC but am not sure. That could explain why some brokers don't follow them. I know when i daytraded (for a very short time), there were no exceptions on any rules related to margin or maintenance but these were dictated by the SEC.