Estimate margin requirements for selling options to manage your buying power.
A margin call occurs when your account equity falls below the broker's maintenance margin requirement — typically 25–30% of the total position value. When this happens, the broker demands you deposit more cash or securities, or will forcibly liquidate positions to restore the required equity level. Margin calls often happen during fast market moves.
Initial margin is the minimum deposit required to open a leveraged position — typically 50% of the purchase price for stocks under Regulation T. Maintenance margin is the minimum equity you must maintain while the position is open, usually 25–30%. If your equity drops below maintenance margin, a margin call is triggered.
Margin increases your buying power, so your gains and losses are calculated on a larger position than your cash alone. If you use 2x leverage (equal cash and margin loan), a 10% stock gain becomes a ~20% gain on your equity — minus interest costs. But a 10% stock loss becomes a ~20% loss, showing how leverage cuts both ways.
Some options strategies require margin — particularly naked puts, naked calls, and certain spreads where the broker holds collateral against potential losses. For defined-risk strategies like long calls or debit spreads, margin is not typically required. Margin requirements vary significantly by broker and position type.
The margin loan accrues daily interest at your broker's annual rate (often 8–12% for retail brokers). This cost must be factored into your breakeven — you need your trade to gain enough to cover both the interest cost and any commissions. Longer holding periods mean higher interest costs, which is why margin is typically better suited for shorter-duration trades.