I'm using margin. Why do I have negative buying power?
There are a few reasons why your buying power may be negative. Here are some examples:
If your portfolio value drops below margin requirements, your account will display negative buying power. This doesn’t necessarily mean that you’re in a margin call, but you do need positive buying power to buy stocks or options.
For more information about assignments, check out Expiration, Exercise, and Assignment.
If you’re trading an options spread, your long leg should cover your short leg. However, you may see negative buying power if the short leg of your options spread is assigned prior to the expiration date.
When you’re assigned early on a short leg in general, before you exercise the long leg of your spread, your buying power will decrease and may become negative. This is because the positions you hold are used to calculate your buying power, and at that time, the shares (for call spreads) or buying power (for put spreads) are needed to cover the deficit in your account.
If your long leg is in-the-money and you want to exercise, please contact us so we can help exercise it for you.
An account deficit due to early assignment might result in a margin call. In these cases, our brokers are likely to take action to cover your position for you.
In general, you’ll get more buying power when you deposit more funds into your account, and the value of your account holdings is increasing.
You can increase your buying power by depositing funds, selling stocks, ETFs, or options. If you are not in a margin call, you can also wait for your portfolio value to rise.
All investments involve risk and loss of principal is possible.
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If you are not using margin, check out I'm not using margin. Why do I have negative buying power?.