How do I analyse margin utilisation spikes around option expiry?

When a listed option, where the underlying asset is a stock or ETF, is approaching expiry and is in-the-money (ITM) or close to it, Totality’s risk system begins preparing for potential assignment by reserving cash to cover the cost of acquiring the underlying shares.

How It Works:

• Two hours before expiry, the system starts reserving increasing amounts of cash minute by minute.

• This reserved amount ensures you have sufficient funds to purchase the underlying shares at the strike price if the option is exercised.

• This cash reservation is in addition to the margin required to maintain your existing margin positions.

You’ll see this reflected as an increase in both your Initial Margin Requirement and Maintenance Margin Requirement, which may cause a noticeable spike in your margin utilisation around expiry.

What If You Don’t Have Enough Margin Collateral?

If your account lacks sufficient funds to meet the increased margin requirements:

• Totality will prioritise closing out stock options expiring on the same day.

• In some cases, other margin positions may also be closed to manage risk exposure.

At Expiry – What Happens?

• If the option is in-the-money and you have enough cash to cover the purchase, you’ll be assigned the underlying shares at the strike price.

• If the option is in-the-money but you don’t have sufficient cash, Totality will automatically close your option position before expiry to avoid settlement issues.

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