# Need clarity on margins while going short option spreads

**URL:** <https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425>\
**Category:** Alpaca Trading\
**Created:** [March 13, 2025, 2:54pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425 "2025-03-13T14:54:16Z")\
**Posts on this page:** 8\
**Page:** 1

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**Author:** ![sarahvignale](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@sarahvignale](https://forum.alpaca.markets/u/sarahvignale)\
**Post date:** [March 13, 2025, 2:54pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/1 "2025-03-13T14:54:16Z")

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Hi,

Consider the following scenario:

# Current state::

# cash 26649.22 buying\_power 107420 initial\_margin 0 last\_maintenance\_margin 1 maintenance\_margin 0 non\_marginable\_buying\_power 26649.22 options\_buying\_power 26649.22 portfolio\_value 26650.22

Note that our portfolio only includes a 0.01 option and that explains the 1$ difference between portfolio value and cash.

Now, at this juncture, let us assume that we do the following trade:

Short call spread by going long NVDA250314C00113000 and short NVDA250314C00111000. Also assume that the execution of this trade results in a credit of $155. Since the net risk of this position is limited to $(113 - 111)\*100 = $200, we expect a margin requirement of the same amount as well.

# However after this trade, we have the following state:

# cash 26804.13 ------ Increase of $155, which is expected. buying\_power 102959.76 initial\_margin 200 last\_maintenance\_margin 1 maintenance\_margin 200 non\_marginable\_buying\_power 25664.67 – a decrease by $984.55, options\_buying\_power 25664.67-- a decrease by $984.55, portfolio\_value 26635.13

Thus non margin buying power, as well as options\_buying\_power has decreased by unexplained huge amounts. I would have expected both of these to decrease by $200, since that the maximum risk associated with this portfolio. Can someone explain this non trivial decrease in the value of these metrics?

Thanks

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**Author:** ![sarahvignale](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@sarahvignale](https://forum.alpaca.markets/u/sarahvignale)\
**Post date:** [March 13, 2025, 3:26pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/2 "2025-03-13T15:26:38Z")

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I have confirmed that this issue happens even when we buy debit option spreads. Consider the following example:

_Current state_

\<\>  
cash 26548.16  
buying\_power 107417.08  
initial\_margin 0  
last\_maintenance\_margin 1  
maintenance\_margin 0  
non\_marginable\_buying\_power 26548.16  
options\_buying\_power 26548.16  
portfolio\_value 26549.16  
\<\>

Buy a debit option spread by going long NVDA250314C00111000 and short NVDA250314C00113000, incurring a net cost of $170. The resultant state is the following:

\<\>  
cash 26378.06 ---- \> decrease of $170, which is expected.  
buying\_power 103656.8  
initial\_margin 0  
last\_maintenance\_margin 1  
maintenance\_margin 0  
non\_marginable\_buying\_power 25787.8 → decrease of $760.36, which is totally unexpected.

options\_buying\_power 25787.8  
portfolio\_value 26528.06

\<\>

Thus, the upshot of what we have seen is this: Even if our spread is a net debit one, if it involves a short option position, the non margin is decreasing by a very large amount. This behaviour looks erroneous and needs to be fixed. We do not see this behaviour when we go long a simple call/put.

Let me know if you need more clarifications.

Thanks

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**Author:** ![sarahvignale](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@sarahvignale](https://forum.alpaca.markets/u/sarahvignale)\
**Post date:** [March 18, 2025, 4:08pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/3 "2025-03-18T16:08:51Z")

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I am summarising all my issues/questions as a document here. Let me know if you need more information.

 ![Comments margin computation Alpaca](https://us1.discourse-cdn.com/flex020/uploads/alp/original/2X/5/5b8f61428105c530066d01ee6cb8b555d7055656.jpeg)

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**Author:** ![sarahvignale](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@sarahvignale](https://forum.alpaca.markets/u/sarahvignale)\
**Post date:** [March 20, 2025, 4:17pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/4 "2025-03-20T16:17:20Z")

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Does anyone have any thoughts on these? I would be delighted to provide any clarification whatsoever.

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**Author:** ![ven7782](https://avatars.discourse-cdn.com/v4/letter/v/90ced4/32.png) [@ven7782](https://forum.alpaca.markets/u/ven7782)\
**Post date:** [March 21, 2025, 6:41pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/5 "2025-03-21T18:41:54Z")

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There is no straightforward answer to this. It all depends on how a broker calculates margin allocation and risk management. The reduction of non marginable buying power will always be more than your net risk. I tired the same setup on etrade and the reduction was more there, like $2000 vs $984 for Alpaca. As a rule of thumb, the reduction of buying power will be of the order of magnitude 4 to 5 times your net risk.

It all depends on the broker and the exact math is implementation dependent which a support personal may not know.

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**Author:** ![sarahvignale](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@sarahvignale](https://forum.alpaca.markets/u/sarahvignale)\
**Post date:** [March 22, 2025, 6:50am UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/6 "2025-03-22T06:50:07Z")

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Thank you @ven7782 for checking this. However, the reply from Alpaca support to me on earlier query goes something like this:

# ======= Yes, we support short call spreads. To initiate this strategy, you must maintain sufficient funds to meet the margin requirement, which is calculated as the difference between the strike prices × 100 × the number of contracts.

Also, if you were to check the [margin requirements for IBKR](https://www.interactivebrokers.com/en/trading/margin-options.php)(which is the other broker you use), it goes in line with the reply I obtained from Alpaca support.

So this needs to be fixed.

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**Author:** ![ven7782](https://avatars.discourse-cdn.com/v4/letter/v/90ced4/32.png) [@ven7782](https://forum.alpaca.markets/u/ven7782)\
**Post date:** [March 22, 2025, 9:01pm UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/7 "2025-03-22T21:01:15Z")

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You already calculated that right? 2 \* 100 \* 1 = 200. The math doesn’t add up.

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**Author:** ![sarahvignale](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@sarahvignale](https://forum.alpaca.markets/u/sarahvignale)\
**Post date:** [March 24, 2025, 11:49am UTC](https://forum.alpaca.markets/t/need-clarity-on-margins-while-going-short-option-spreads/16425/8 "2025-03-24T11:49:17Z")

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Yes and that is the issue. Alpaca is deducting a lot more than what they say.