Margin Relief on Cash-Settled Index Options

What is Margin Relief?

Margin Relief on Cboe's Cash-Settled Index options provide the potential for greater capital efficiency on overwriting strategies using Cboe Index Options to overwrite long exchange-traded fund (ETF) positions based on the same index.



Margin relief enables traders to use cash-settled index options as an efficient trading and hedging tool to manage positions at a potentially lower cost.


Cboe's new rule offers margin relief for writing cash-settled index options against ETFs based on the same index.

Potential Tax Benefits

Cboe's suite of index options offer cash-settlement, European-style exercise and potential tax benefits.

How Margin Relief Works

Cboe's rule offers improved margin treatment for writing, or selling, a cash-settled index option against an ETF that is based on the same index as the index option. In the same way an investor can write an equity call option while holding a long position in the underlying security (i.e., a "covered" call), Cboe's rule change allows for writing of index options in a similar manner.

Call Writing Example

In a margin account, a customer is long SPY ETF and wants to sell an XSP call option against this holding. Even though the index underlying XSP options might not exactly track the SPY ETF and the SPY ETF is not deliverable if the short XSP call is assigned, the customer may receive relief from the short option margin requirement. The total value of the SPY ETF position must equal or exceed the aggregate underlying index value (XSP x 100). Thus, it's possible more than 100 ETF shares would be required. In this trade example, the customer is long 100 SPY ETF@ 448.50 and sells 1 XSP 9/15/2023 460c [email protected] and the condition pertaining to the total value of the SPY ETF position is met. Initially (provided the short call option is out-of-the-money) no margin would be required on the option. 1

Be sure to check with your brokerage firm to determine if it offers the margin relief and if there are any special house requirements.

*Note: after initially established, margin is required equal to the greater of: 1) the amount, if any, by which the total value of the ETF position is below 100% of the aggregate current underlying index value or 2) the amount, if any, by which the aggregate current underlying index value is above (below) the aggregate exercise price of the call (put) option. If the total value of the ETF position falls below 95% of the aggregate underlying index value, this margin relief will no longer be allowed and an uncovered short option margin requirement will be triggered. Purchase or deposit of additional shares of the SPY ETF to bring the total value up to the aggregate underlying index value could reestablish margin relief.

Which Index Options Can I Use for Margin Relief?

Now you can choose which ETF you want to own, and still use index options as your source of yield. You get the best of both worlds! Buy whichever ETF you want which tracks the S&P 500, and then sell whichever index option linked to the S&P 500 is right for you (SPX or XSP). And did you think your only way to harvest yield in emerging markets was to sell EEM calls against your EEM long shares? Think again, now you can utilize MXEF index options! Cboe·s new rule applies to any index call option written against a long position (or any index put option written against a short position) in a non-leveraged index mutual fund or non-leveraged ETF that is based on the same index underlying as the index option and held in the same margin account. To learn more about Cboe·s index options, visit:

Symbols Contracts
XSP Cboe Mini-SPX Index Options
SPX Cboe S&P 500 Index Options
MRUT Cboe Mini-Russell 2000 Index Options
RUT Cboe Russell 2000 Index Options
MXEA Cboe MSCI EAFE Index Options
MXEF Cboe MSCI Emerging Markets Index Options
MXACW Cboe MSCI® ACWI® Index Options
MXWLD Cboe MSCI® World® Index Options
MXUSA Cboe MSCI® USA Index Options
DJX Dow Jones Industrial Average Index Options
SPESG S&P 500 ESG Index Options

Frequently Asked Questions

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There are important risks associated with transacting in any of the Cboe Company products or any of the digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: Brokerage firms may require customers to post higher margins than any minimum margins specified. © 2024 Cboe Exchange, Inc. All Rights Reserved.