You have an account deficit because you’ve used more buying power than you had available.

Note for options trades, this can happen when you’re assigned early on an options spread or in certain option exercise scenarios.

You can resolve an account deficit by depositing funds or closing positions.

If you're charged a fee and you don’t have enough brokerage cash in your account to cover it, you may have an account deficit. Some of the most common fees that cause customers to have an account deficit are fees associated with American Depositary Receipts (ADRs).

When trading short calls or puts, whether as part of a spread, a covered call, or a single leg, you may be assigned early on your short option. This assignment will result in a stock position of either long or short 100 shares. Since the collateral requirement for 100 shares is often much larger than the original options position, your account will likely be in a deficit. The deficit must be covered in order to resume regular trading.

Assignment of the short leg of a debit or credit spread is a common occurrence. If assigned on the short leg of a spread, you have a few options such as the following:

• Liquidate the position: After assignment, your remaining position will be long shares and long puts. You can sell the put position, and then sell the shares. Selling one immediately after the other will help mitigate slippage risk and prevent increased directional stock risk. Note, in case of a call assignment, the short shares must be bought first to avoid unlimited upside risk.
• Exercise the other leg of your spread: If the remaining leg of your spread is in-the-money, you can exercise your long call or put to counter the shares position. Note, by exercising an option, you will be forfeiting any time value retained in the options premium. This often makes exercising an option a bad option for at-the-money or long dated options.
• Make a deposit: You can always deposit enough funds to meet the amount of the deficit and put the account in good standing.

You can contact us for help with possible options and scenarios.

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