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Multi-leg margin

Margin charged on a spread as a package rather than leg by leg, which is why a defined-risk structure requires only its maximum loss.

Brokers recognise that the long leg of a vertical caps the short leg's risk, so they charge the width minus the credit rather than a naked-option-requirement. The recognition depends on the legs being in the same underlying, the same expiration and correctly paired — which is a matter of how the order was entered.

This is where legging into spreads causes real damage. Two separately entered orders may sit in the account as a naked short and an unrelated long, carrying full naked margin until the broker's overnight process pairs them, and sometimes not even then.

Example: the XYZ $47.50/$45 put spread requires $190. Sell the $47.50 put alone and you face roughly $900 of naked-put requirement until the $45 put is bought and the pair is recognised. Same final position, very different intraday capital.

Related: buying-power-reduction, reg-t-options-margin, legging, combo-order

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Margin and leverageA small deposit controlling a much larger position, and the point at which losses trigger a margin call.Position you controlnotional value $100,000your margin deposit: $5,000$100,000 / $5,000 = 20:1 leverageYour deposit absorbs every dollar of loss$5,000$2,500$0Equity leftMARGIN CALLequity has fallen to $2,5000%1%2%2.5%3%4%5%How far the price moves against you
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.

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