Are option contracts subject to mark to market rules
If I sell a covered call, on stock I own 100%, there is no risk of a margin call. The stock goes to zero, I'm still not ask to send in more money. But, if bought on margin, margin rules apply.  A naked put would require you to be able to buy the stock if put to you. As the price of the stock drops, you still need to be able to buy it at the put strike price.  Mark to market is just an expression describing how your positions are considered each day.
"The change is generally known as the Options Symbology Initiative (or ""OSI"") and there is a highly comprehensive guide to what occurred here. The basic gist of what occurred was a shift FROM: A coded system in which a shorter (3   to 5 letter symbol) could be used, but   the symbols required a data source to   determine what they meant. MSQ AD   used to be a MSFT Jan 20 option, but   you had to look up MSQ in a table to   know that. TO: A system in which much longer symbols   are needed, but they contain all the   information required to identify a   unique option: DELL 4.000 C 5/16/2010   isn't easy to type, but once you know   how to read it, it's easy to see that   it's an option on DELL, expiring on May 16th 2010, is a call (rather   than a put,) and has a strike price   of 4. As to why they did it, there are a number of benefits, but most important reason is this one:  they were running out of symbols.  The number of permutations of 3-5 letter symbols had been exceeded by the number of options that had been listed, resulting in the need to ""recycle"" symbols.   This meant that a current option symbol would be the same as an old one, in some cases on a different stock, which was wreaking havoc on historical data." Your assets are marked to market. If you buy at X, and the market is bidding at 99.9% * X then you've already lost 0.1%. This is a market value oriented way of looking at costs. You could always value your assets with mark to model, and maybe you do, but no one else will.  Just because you think the stock is worth 2*X doesn't mean the rest of the world agrees, evidenced by the bid.  You surely won't get any margin loans based upon mark to model.  Your bankers won't be convinced of the valuation of your assets based upon mark to model. By strictly a market value oriented way of valuing assets, there is a bid/ask cost. more clarification Relative to littleadv, this is actually a good exposition between the differences between cash and accrual accounting. littleadv is focusing completely on the cash cost of the asset at the time of transaction and saying that there is no bid/ask cost.  Through the lens of cash accounting, that is 100% correct. However, if one uses accrual accounting marking assets to market (as we all do with marketable assets like stocks, bonds, options, etc), there may be a bid/ask cost.  At the time of transaction, the bids used to trade (one's own) are exhausted.  According to exchange rules that are now practically uniform: the highest bid is given priority, and if two bids are bidding the exact same highest price then the oldest bid is given priority; therefore the oldest highest bid has been exhausted and removed at trade. At the time of transaction, the value of the asset cannot be one's own bid but the highest oldest bid leftover.  If that highest oldest bid is lower than the price paid (even with liquid stocks this is usually the case) then one has accrued a bid/ask cost. "I have a Roth IRA with Scottrade, and they allow me to write cash secured puts, as well as covered calls. I can also purchase calls or puts, if I choose. When I write a cash secured put, it automatically deducts the amount required to purchase the shares at the strike price from my ""cash available for transactions""." In the question you cited, I assumed immediate exercise, that is why you understood that I was talking about 30 days after grant. I actually mentioned that assumption in the answer. Sec. 83(b) doesn't apply to options, because options are not assets per se. It only applies to restricted stocks. So the 30 days start counting from the time you get the restricted stock, which is when you early-exercise. As to the AMT, the ISO spread will be considered AMT income in the year of the exercise, if you file the 83(b). For NQSO it is ordinary income. That's the whole point of the election. You can find more detailed explanation on this website. Ok, so disregarding passivity, could you help me through a simplified example?   Say I only had two assets, SPY and TLT, with a respective weight of 35 and 65% and I want want to leverage this to 4x.  Additionally, say daily return covar is:  * B/B .004% * B/S -.004% * S/S .02%   Now, if I read correctly, I should buy ATM calls xxx days in the future.  Which may look like: Ticker, S, K, Option Price, Delta, Lambda  * TLT  $126.04  $126.00  $4.35  0.50  14.5 * SPY  $134.91  $134.00  $6.26  0.55  11.8  ^ This example is pretty close but some assets are far off.   I feel like I'm on the wrong track so I'll stop here.    I just want to lever up my risk-parity. Margin rates are too high and I'm docked by Reg-T. On the US markets, most index options are European style.  Most stock and ETF options are, as you noted, American style. What you have to remember is that Options are derivatives of another asset like stocks for example.  The price of the Option is derived from the price of the underlying. If the underlying is a stock for example, as the price of the stock moves up and down during the trading day, so will the Market Maker's fair value for the Option.  As Options are usually less liquid than the underlying stock, Market Makers are usually more active in 'Providing a Market' with Options. Thus if you place a limit order half way between the current Bid and Ask and the underlying stock price moves towards your limit order, the Market Maker will do their job and 'Provide a Market' at that price, thus executing your order. I think George's answer explains fairly well why the brokerages don't allow this - it's not an exchange rule, it's just that the brokerage has to have the shares to lend, and normally those shares come from people's margin, which is impossible on a non-marginable stock. To address the question of what the alternatives are, on popular stocks like SIRI, a deep In-The-Money put is a fairly accurate emulation of an actual short interest.  If you look at the options on SIRI you will see that a $3 (or higher) put has a delta of -$1, which is the same delta as an actual short share. You also don't have to worry about problems like margin calls when buying options.  The only thing you have to worry about is the expiration date, which isn't generally a major issue if you're buying in-the-money options... unless you're very wrong about the direction of the stock, in which case you could lose everything, but that's always a risk with penny stocks no matter how you trade them. At least with a put option, the maximum amount you can lose is whatever you spent on the contract.  With a short sale, a bull rush on the stock could potentially wipe out your entire margin.  That's why, when betting on downward motion in a microcap or penny stock, I actually prefer to use options.  Just be aware that option contracts can generally only move in increments of $0.05, and that your brokerage will probably impose a bid-ask spread of up to $0.10, so the share price has to move down at least 10 cents (or 10% on a roughly $1 stock like SIRI) for you to just break even; definitely don't attempt to use this as a day-trading tool and go for longer expirations if you can. Oh it is ok. I was a little confused, because I tried to read up on future options and options as much as possible, and to still get question marks worried me. I mean to my knowledge, options can be traded as is without margin, while futures do need margin. If you are a starving artist, you can see the draw of not having to have margin to keep track of, but be able at the same time to learn about another market to trade in (commodities). For exchange contracts, yes. A trader can close a position by taking an offsetting position. CME's introduction to Futures explains it quite well (on page 22).  Exiting the Market Jack entered the market on the buy side,   speculating that the S&P 500 futures price would move higher. He has   three choices for exiting the market: Interesting, but I don't think we are talking the same thing. This seems to say that that the fund itself doesn't have the rule applied: I.E. the MF can't get hit with the 5% commission when you buy it.  That makes sense.  What I'm asking though is that when my (say) American Fund that I own already does a rebalance, the constituent holdings change. Those securities are not exempt from the rule and thus when they are transacted can have commissions applied.  As a matter of fact the broker for those securities has no idea if the fund is eligible or not.   Where did you get this from? As I'm. It studying for a series 7 I'm probably missing some foundational sources. "According to page 56 of the 2015 IRS Publication 550 on Investment Income and Expenses: Wash sales. Your holding period for substantially identical stock or securities you acquire in a wash sale includes the period you held the old stock or securities. It looks like the rule applies to stocks and other securities, including options. It seems like the key is ""substantially identical"". For your brokerage / trading platform to handle these periods correctly for reporting to IRS, it seems best to trade the same security instead of trying to use something substantially identical." "I would think that a lot of brokers would put the restriction suggested in @homer150mw in place or something more restrictive, so that's the first line of answer. If you did get assigned on your short option, then (I think) the T+3 settlement rules would matter for you.  Basically you have 3 days to deliver.  You'll get a note from your broker demanding that you provide the stock and probably threatening to liquidate assets in your account to cover their costs if you don't comply.  If you still have the long-leg of the calendar spread then you can obtain the stock by exercising your long call, or, if you have sufficient funds available, you can just buy the stock and keep your long call.  (If you're planning to exercise the long call to cover the position, then you need to check with your broker to see how quickly the stock so-obtained will get credited to your account since it also has some settlement timeline.  It's possible that you may not be able to get the stock quickly enough, especially if you act on day 3.) Note that this is why you must buy the call with the far date.  It is your ""insurance"" against a big move against you and getting assigned on your short call at a price that you cannot cover. With the IRA, you have some additional concerns over regular cash account - Namely you cannot freely contribute new cash any time that you want.  That means that you have to have some coherent strategy in place here that ensures you can cover your obligations no matter what scenario unfolds.  Usually brokers put additional restrictions on trades within IRAs just for this reason. Finally, in the cash account and assuming that you are assigned on your short call, you could potentially could get hit with a good faith, cash liquidation, or free riding violation when your short call is assigned, depending on how you deliver the stock and other things that you're doing in the same account.  There are other questions on that on this site and lots of information online.  The rules aren't super-simple, so I won't try to reproduce them here.  Some related questions to those rules: An external reference also on potential violations in a cash account: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations" "fennec has a very good answer but i feel it provides too much information. So i'll just try to explain what that sentence says. Put option is the right to sell a stock. ""16 puts on Cisco at 71 cents"", means John comes to Jim and says, i'll give you 71 cent now, if you allow me to sell one share of Cisco to you at $16 at some point in the future ( on expiration date).  NYT quote says 1000 puts that means 1000 contracts - he bought a right to sell 100,000 shares of Cisco on some day at $16/share. Call option - same idea: right to buy a stock." "I found the answer after some searching online. It turns out that when talking options, rarely is the current P/L line considered when talking about making adjustments/taking trades off. From Investopedia: http://www.investopedia.com/terms/b/breakevenpoint.asp ""... For options trading, the breakeven point is the market price that a stock must reach for an option buyer to avoid a loss if they exercise the option. For a call buyer, the breakeven point is the strike price plus the premium paid, while breakeven for a put position is the strike price minus the premium paid."" The first sentence sounds more like the current P/L line, but the bold section clearly states the rule I was looking for. In the example posted in my question above, the breakpoints labeled with ""1"" would be the break points I should consider."