When I buy or sell an option contract, am I subject to futures style mark to market rules...i.e if the position moves against me, will the broker issue a margin call to put up additional collateral, or worse automatically sell some other holdings in my account?
I am talking of Interactive Brokers specifically.
I thought the answer was 'No', but then i read this in this option guide:
As I mentioned earlier, short straddles, since they involve selling naked options, are suitable for traders with some experience. Your broker will take care of that. Since selling naked options involves getting an approval, your broker will need to review your trading history as well as the amount of buying power in your account.
As always with selling options, a margin account is required. Short straddle margin requirement equals to the greater of requirements on short puts or short calls. That amounts to 20% of the stock price plus the amount the option is in the money.
Let’s calculate margin requirements using the PBR example, assuming the straddle was opened for 20 contracts total (single option contract equals 100 shares of stock). Since calls were slightly in the money, they would be used to calculate the margin. ($15.53 * 0.20 + 0.53) * 10 * 100 = $3636.
To earn a profit of up to $3500 we had to provide a collateral of $3636.
As long as the position is open, it is marked to market every day.