FAQs – Options

Any option position other than one outlined below is considered uncovered:

• Long call or long put;
• Covered call;
• Long call spread – Short calls vs equal quantity of long calls where the exercise price of the long calls is equal to or less than the exercise price of the short calls; or
• Long put spread – Short put vs equal quantity of long puts where the exercise price of the long puts is equal to or greater.

Option trading permissions are available for Margin, Cash and IRA/Retirement accounts. 

A Margin account is allowed to sell naked calls or sell calls as part of a combo spread position. 

In a Cash or IRA account full payment is required for all call and put purchases. “Limited Option” trading permissions are also available for margin accounts with IBLLC-US. They allow buying options, selling fully cash secured naked puts and some limited types of European style option strategies:

• Long Call or a Long Put
• Covered Calls
• Short Naked Put: only if covered by cash
• Call Spread: Only European style cash settled
• Put Spread: Only European style cash settled
• Long Butterfly: Only European style cash settled
• Iron Condor: Only European style cash settled
• Long Call and Put (long straddle)

An account must first have approved US option trading permissions to enter an option order. A margin account is allowed to trade naked short calls and option combo spreads that include a short call leg. You can trade a Bull credit put combo spread in a margin type account, but if you have a Cash type account the short put leg must be fully cash secured.

Margin accounts at Interactive Brokers have the capability of selecting “Limited Option” trading permissions during the account application. The account will be allowed to enter orders for the option strategies listed below when “Limited Options” trading permissions is enabled:

• Long Call or a Long Put
• Covered Calls
• Short Naked Put: only if covered by cash
• Call Spread: Only European style cash settled
• Put Spread: Only European style cash settled
• Long Butterfly: Only European style cash settled
• Iron Condor: Only European style cash settled
• Long Call and Put (long straddle)

Trade stocks, options, futures, currencies, bonds, ETFs and more from a single GPS Integrated Investment Account. Clients from most countries are allowed to trade options and benefit from our low commissions.

Please review the trading requirements and use the buttons above to update your trading permissions and subscribe to real time data from Client Portal. If you do not subscribe to real time data you will receive free delayed data when available and you will still be able to trade.

Customers requesting to exercise US or Canadian warrants should submit a ticket in Client Portal via the Message Center. Select the User menu (head and shoulders icon in the top right corner) followed by Secure Message Center. Select Account Services as the category and Corporate Actions/Dividends as the topic. Only settled warrants can be exercised.

Tickets should include the following information:

• Request Title should be “Warrant Exercise Request”
• The warrant Name and Symbol (no need to specify the CUSIP of the warrants)
• The stated action (“Exercise”)
• The Account Number and EXACT Number of Warrants you wish to exercise (“ALL” is not a valid instruction)
• Agree to the terms and, if applicable, indicate whether the exercise is a Cash or Cashless exercise

The broker will pass through all associated exercise costs to the customer upon completion of the request.

Cash exercises typically take 1-2 business dates for the warrants to be converted into shares. Cashless exercises typically take 2-3 business dates for the warrants to be converted into shares.

When available, mini options can trade under a different Trading Class. Click on the TRADING CLASS drop-down menu in the top-right of the Option Chain to select different Trading Classes (ex. click on TRADING CLASS and select MOA to see mini options on ticker EOE, the EOE stock index).

Implied volatility measures the uncertainty of the underlying’s price implied from the options prices.

Implied volatility is calculated using a 100-step binary tree for American style options, and a Black-Scholes model for European style options. Interest rates are calculated using the settlement prices from the day’s Eurodollar futures contracts, and dividends are based on historical payouts.

The 30-day volatility is the at-market volatility estimated for a maturity thirty calendar days forward of the current trading day. It is based on option prices from two consecutive expiration months. The first expiration month is that which has at least eight calendar days to run. The implied volatility is estimated for the eight options on the four closest to market strikes in each expiry. The implied volatilities are fit to a parabola as a function of the strike price for each expiry. The at-the-market implied volatility for an expiry is then taken to be the value of the fit parabola at the expected future price for the expiry. A linear interpolation (or extrapolation, as required) of the 30-day variance based on the squares of the at-market volatilities is performed. V30 is then the square root of the estimated variance. If there is no first expiration month with less than sixty calendar days to run, we do not calculate a V30.

In the case of U.S. exchange listed options cleared by OCC, GPS’s deadline for providing notification of intent to exercise is 17:30 ET if the option is being exercised prior to expiration. At expiration, notice of intent to exercise is generally not required as OCC will automatically exercise options that are in-the-money by $0.01 or more.

If a client is required to provide notice of intent to exercise at expiration (i.e., OCC removes contract from Exercise by Exception processing due to a stock halt or other uncertainty as to underlying value) or does not want an option that is projected to be in-the-money by $0.01 or more exercised, then instructions must be provided to GPS by 17:30 ET.

In the TWS Option Trader or TWS/Mosaic Option Chains window, click on the drop down menu that says SPX in the upper right corner of the option chains. Select SPXW as the Trading Class and the screen will change to the SPXW Weekly options. The rest of the available weekly expiries can be found by clicking on the More tab to the right of the currently listed expiries.

In the U.S. and Canada, the depository will accept requests to exercise warrants up to 13:00 ET. 

Instructions received after that time will be considered for exercise on the following trading day.

If you already have option trading permissions and a Reg T margin account, the minimum balance required for trading options depends upon the following considerations:

• If you are looking to purchase an option, you need to have the funds necessary to pay for the option in full.
• You are required, by regulation, to maintain account equity of at least USD 2,000 to retain margin eligibility. If you do not, you would not be able to sell options on an uncovered basis. If you do maintain account equity above USD 2,000, you would still need to have sufficient equity to satisfy the margin requirement were the sell order to be executed. If you do not have sufficient equity, your order will be rejected.

Warrants, structured products and certificates cannot be sold short nor bought on margin at GPS.

Open interest is defined as the total number of outstanding option contracts on a given series or a given underlying. Option orders are generally associated with an election of opening or closing and buy or sell. The effect of a given order upon open interest is based upon the elections of both the buyer and seller and is outlined in the table below.

The expiration date is provided on client statements as well as in the Warrant Features of the contract search. This information is provided by a third party and may be subject to change without notification. Clients holding warrant positions should ensure they verify the contract features with the issuer.

Historical Volatility is a 30 day representation of historical vol calculated using the Garman-Klass model. Information about the Garman-Klass model can be found at the CME Group’s website.

No. In order to exercise warrants for cash the account must hold sufficient funds available for withdrawal to pay the full cost of the warrant exercise.

If a corporate action such as a merger, acquisition or spin-off occur before the expiration of your contract, the clearinghouse will typically announce an adjustment to the amount or name of the security deliverable under the contract. When such adjustments occur, the party delivering the underlying (i.e., short holder of a call or long holder of a put) is obligated to deliver the adjusted security at the option strike price.

All warrants must be settled in order to submit for exercise.

Please note, warrants listed on European exchanges cannot be exercised before expiry. They will auto-exercise at expiration if they are in-the-money, otherwise they will be removed as worthless.

Option assignments are determined based on net positions after the close of the market each day and if you bought back your short contract, you no longer have a short position at the end of the day and no possibility of assignment.

No. We do not accept requests to submit warrant exercises in the future. Exercise requests are submitted for processing on the same day, provided there is sufficient time to meet the depository’s processing schedule.

Please note, warrants listed on European exchanges cannot be exercised before expiry. They will auto-exercise at expiration if they are in-the-money, otherwise they will be removed as worthless.

It is not possible to exercise warrants through the Voluntary Corporate Action tool.

Warrants listed in the U.S. and Canada can only be exercised by submitting an Inquiry Ticket with exercise instructions.