Happy Friday Hype From The OCC! Margin Calls Incoming!
You're gonna wish it was Tuesday Nov 5 because the Options Clearing Corporation just reminded their members today about their Intra-Day Margin Call Process [OCC Memo (PDF)] in Rule 609 [OCC Rules] with the following:
Here's the text of the key paragraph with some bolding for key phrases:
As the U.S. Presidential election nears, there is a potential for increased market volatility. OCC would like to remind Members of the intra-day margin call process. Pursuant to OCC Rule 609, OCC may require the deposit of intra-day margin by a Clearing Member in any account at any time during any business day. An intra-day margin call is generated when deemed advisable by OCC, including, for example, if an account exhibits losses exceeding 50% of that account’s total risk charges based upon of start-of-day positions. Calls are generally issued during a pre-designated window, which occurs at or around 12:00 p.m. CT, but may be issued outside of the pre-designated window when warranted by market conditions or other circumstances. The minimum margin call is $500,000. Members are required to meet such calls within 60 minutes of issuance.
The OCC is warning members about increased market volatility around the time of the election on Nov. 5. And that margin calls ☎️ can happen at any time during the business day because, for example, if someone has losses exceeding 50% of their total risk charge. (That's a lotta losses.) The minimum margin call will be for $500k (Half A Million Bucks) which must be met within an hour.
Here's OCC Rule 609:
Margin Calls can happen if the market price of any short options change and/or if the value of securities deposited change. Remember those deep ITM short GME $125 Puts which looked like an ultimatum to the markets (particularly the OCC) to keep GME under $125? If GME goes up, those short puts lose value real fast with infinite loss potential. The OCC's response today is a warning of margin calls.
For those of you who don't remember or are new here...
- When the OCC Proposed Reducing Margin Requirements To Prevent A Cascade of Clearing Member Failures
- Apes rose up to fight that 🐂💩 by commenting to the SEC en masse.
- AND WON!
So now the OCC is first in line to take on losses, just as the OCC requested to set up their Pension Pilfering Playbook.