Buying power & margin
FINRA maintenance-margin rules for shorts, spreads, and condors.
Short option positions tie up buying power as margin. The simulator models FINRA-style maintenance-margin rules so your available capital behaves like a real margin account.
Available buying power
Your available buying power is the cash in the account, less the margin currently reserved against open and pending short positions:
available_BP = (deposits − withdrawals + credits − debits − fees) − maintenance_margin
Before any order is accepted, the simulator projects your buying power including all existing pending orders plus the new one. If the result would go negative, the order is rejected on the spot. The same projection is returned as a buying-power preview on the order ticket, broken into the change in margin and the change in available buying power.
Maintenance margin by position type
| Position type | Margin requirement |
|---|---|
| Naked short option (not accepted — see below) | strike × 20% × quantity × 100 |
| Vertical spread (credit) | spread width × quantity × 100 |
| Iron condor | max(call-side margin, put-side margin) — not the sum |
| Covered position (long leg covers the short) | Zero additional margin |
A few consequences worth internalizing:
- Naked shorts are not allowed. The platform is defined-risk only: an order that would leave an uncovered short option is rejected with
naked short positions are not allowed, regardless of capital. The naked-short margin formula above still describes the FINRA maintenance requirement, but you cannot open one — add the matching long leg to make it a spread. - Defined-risk spreads are cheap. A debit vertical needs no maintenance margin at all: the long leg fully covers the short. A credit vertical reserves only the spread width.
- Iron condors don't double up. Because the underlying can't be below the put spread and above the call spread at the same time, only the larger side's margin is reserved.
Pending orders reserve margin too
When you place a pending limit or stop order that would open a short, its projected margin is reserved immediately — so your buying power reflects the commitment before the order fills. Cancel the order before it fills and the reserved margin is released.
Starting capital
When you create a live account you choose a starting capital (from $1,000 to $10,000,000), which becomes its opening cash balance. Pick enough to support the defined-risk spreads and condors you want to test — a credit vertical reserves only its spread width, so even a small account goes a long way. The starting-capital choice applies to live accounts only: practice always runs with a fixed $100,000 (like backtests), so there is nothing to choose. (Backtests, too, always run with a fixed $100,000 starting capital so results stay comparable across strategies.)