Hi,
I am pasting a relevant conversation, I had with Alpaca support, as I believe it will be useful to everyone.
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You also asked “Let us assume that I have $10,000 in cash and $50,000 worth stock in my Alpaca live account. Will my options buying power then be limited at $10,000? Will be able to avail myself a margin loan using my stock as a collateral and use the same to do option trades?”
Yes, you can avail yourself of a margin loan using the stock and then use those loan proceeds to buy options. In your example, if you have $50,000 in stock and $10,000 cash your option buying power would be $35,000. Basically, half of your stock can be purchased with borrowed funds. If you have $50,000 in stock then you can borrow $25,000. If you buy $35,000 in options your cash will be -$25,000 (ie 10,000-35,000=-25,000). That negative cash is the most you can ‘borrow’ which is why $35,000 is the most you can buy in options.
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