Option Investor


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Yesterday I returned home to a ton of messages and phone calls from very concerned CPTI readers and clients who received the following email from OptionsXpress:

"We are notifying you of an additional call of ________ for your account, _________, due to an interpretive issue regarding the structure of an iron condor. Our online, software-based requirements work on the understanding that a condor must have equidistant call and put spreads, but as long as there some distance between the spreads, the interval between the spreads themselves can be greater or smaller than the interval between the legs of each spread. However, we have been notified that a more conservative interpretation of the wording in the regulatory requirement - that each of the four options must maintain an equal and equidistant relationship between the strikes. This means that your account will not receive the benefit of the lower requirements offered by the iron condor, and a margin call may be issued for your account (although this will not appear online). We are currently seeking relief from our regulator, however, the requirements on both sides of any condor that does not maintain an equidistant interval between each of the four options will increase the clearing firm's requirements and that may prevent withdrawals and other activity if the differential is significant. Again, you may not notice this difference online."

Keep your cool. Don't over-react. This a not a reason to panic. So far, the only people who have been adversely affected, as far as I know, are people who have written checks against their OptionsXpress accounts or have tried to wire money out of their accounts. I know of a few checks that have bounced, etc.

Here is the story that is circulating. OptionsXpress (and BrokersXpress) have been clearing their trades through Goldman Sachs. It's the intention of OptionsXpress & BrokersXpress to start to begin to self-clear their own trades. That means that Goldman Sachs is about to lose a large chunk of business. This may be their not-so-delicate way of bidding OptionsXpress a not-so-fond farewell -- to cause as much chaos as possible with OX & BX account holders. Again, this, to some degree, is conjecture.

The bottom line is that this will be sorted out reasonably soon. It's impractical to expect them to apply a new set of rules to positions that are already in existence.

I would suggest that, if you're really concerned, you call OptionsXpress (888-280-8020) or BrokersXpress (800-599-5759). Just try to avoid moving money into, or out of, your accounts until the situation resolves itself. And, perhaps, hold off putting on any more trades -- without consulting your broker. Till further notice, apparently, the information you see online may not be accurate.

That's all we know for now. Don't worry, this is not the end of efficient Iron Condor trading (as some people fear). We're going to be fine. I'll keep you posted as I learn more about the situation.

Take care,


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