once82 0 Report post Posted July 30, 2020 Hello there I need information on what to do I just received a message from the Robin Hood platform that I have been assigned on a call credit spread and they issued a margin call as well. My trade was I bought a call at $132.50 exp 7/31 Sold call $122.50 exp 7/31 Total credit of $410 The$122.50/was assigned for a total of $12.221 And the 132.50 is open and expires 7/31 Stock is downgrading at $161 I received a margin call and says I owe $18.755. Please help and explain what should I do a Any comments and help would be really appreciated it been trading options for a year now but this is my second credit spread and fairly new to the game Share this post Link to post Share on other sites
Yowster 7,974 Report post Posted July 30, 2020 @once82You'll need to buy back your short stock and sell your 132.5 strike call at the same time, this willl clear up your margin and avoid any directional risk. Share this post Link to post Share on other sites
rasar 1,877 Report post Posted July 30, 2020 7 hours ago, once82 said: Hello there I need information on what to do I just received a message from the Robin Hood platform that I have been assigned on a call credit spread and they issued a margin call as well. My trade was I bought a call at $132.50 exp 7/31 Sold call $122.50 exp 7/31 Total credit of $410 To explain, here's what happened. Your short 122.50 call was a promise to sell someone the stock at a price of 122.50. Someone decided to take you up on it, and "bought" the stock from you. So they paid you money in exchange. Since you didn't really have the stock, the brokerage fulfilled that purchase on your behalf. You now owe the brokerage that stock, since you've technically "borrowed" it from them. As @Yowster advised above, in order to make sure that the market doesn't swing against you, make sure to do the following as one step - as a "combo" order - or, at worst very quickly and close together.: You'll have to buy the stock from the open market (at a higher price now) to give back the stock you "borrowed". To do this, you will be using the payment you received to fund part of the purchase. There's obviously a gap, since the current price is higher than the 122.50 price. To make up the difference, the rest can be mostly paid for by selling the Long call you hold. The remaining balance you'll have to pay from your own pocket. In other words, sell the Long call, and pool that money with the money you were paid for the stock to buy the same quantity of stock from the open market. 1 MoneyMonkey reacted to this Share this post Link to post Share on other sites
once82 0 Report post Posted July 30, 2020 Hi there I was going to sell my long leg and I now disappeared from my account now I really don't know what to do Share this post Link to post Share on other sites
rasar 1,877 Report post Posted July 30, 2020 1 minute ago, once82 said: Hi there I was going to sell my long leg and I now disappeared from my account now I really don't know what to do The brokerage may have exercised it for you to satisfy the margin call. You may find it useful to call them and speak with them directly. Share this post Link to post Share on other sites
once82 0 Report post Posted July 30, 2020 Thanks for your help guys Share this post Link to post Share on other sites
MoneyMonkey 17 Report post Posted July 30, 2020 Great explanation @rasar ! I remember the first time this happened to me - I was almost frozen in panic! Share this post Link to post Share on other sites
rasar 1,877 Report post Posted July 30, 2020 Just now, MoneyMonkey said: Great explanation @rasar ! I remember the first time this happened to me - I was almost frozen in panic! 😄 At least you froze. I wet my pants. 2 Kim and MoneyMonkey reacted to this Share this post Link to post Share on other sites
once82 0 Report post Posted July 30, 2020 I froze wet my pants and still shaking until I see what the outcome is going to be Robin Hood likes to play with your feelings and keep you on edge. No answer on emails or phone. I'm sticking to TOS. It says robin hood exercised and it's pending for the long leg $13.560 Now I'm more 😖 Share this post Link to post Share on other sites
Kim 7,423 Report post Posted July 30, 2020 I guess it happened to most of us at some point in our career.. Happened to me over 10 years ago but I still remember that sound... tiktok tiktok tiktok tiktok You know what that sound is? That is the sound of IB liquidating your positions.. one by one. You hear that Mr. Anderson?... That is the sound of inevitability... 1 MoneyMonkey reacted to this Share this post Link to post Share on other sites
bneuser 0 Report post Posted July 30, 2020 I also dropped Robinhood because of the way they handle assignments and margin risks. Once the other brokerages cut their fees, Robinhood wasn't as attractive anymore. Robinhood once closed an SPY spread of mine because we held it through the ex-dividend date, even though there was zero risk of assignment as the spot price was well below the call. But when they liquidated my position due to the ex-dividend assignment risk, and they legged out of the spread. They bought back the shorts immediately, but it took 30 minutes to sell the longs. Of course the price swung on that 30 minutes and I lost $500 just because they didn't close it as a spread. I would consider dropping Robinhood. They have a lot of automation on their system to limit risk and their rules aren't set up to handle the way we utilize our strategies. Share this post Link to post Share on other sites
MaryPaananen 259 Report post Posted July 30, 2020 I'm knocking on wood over here . . . have not been assigned as of yet . . . but that dang @Kim seems to be predicting it is not an "IF", but a "WHEN". LOL Share this post Link to post Share on other sites
