Options Cycles and Withdrawing Collateral
You can repay whenever repayments are not paused. Withdrawing collateral follows the options cycle, because calls are written against it.
How a cycle looks from your side
Cycle opens
The asset's pool is locked and calls are written on it. Collateral in the pool cannot be withdrawn while the cycle runs.
Cycle runs
Weekly or every two weeks, depending on the asset. You can still borrow, repay and add collateral.
Expiry
The calls expire unused or are exercised.
Settlement
The cycle's cash is settled and, after an assignment, the pool is restored.
Cycle closes
The pool unlocks. Collateral can be withdrawn once its tokens are back from the issuer, usually the next business day, until the next cycle opens.
The app shows each asset's cycle length and next expiry, and whether its pool is currently locked.
Why a withdrawal after a cycle can take a business day
Once your collateral has joined a pool, it is held as real shares in Spout's brokerage account, with a receipt token standing in for it in the pool. To withdraw, the shares go back to the issuer, which reissues the tokens to the pool, and the receipt tokens are burned. The options clearing house releases shares overnight after expiry, and the issuer does not reissue tokens on weekends, so collateral from a Friday expiry is usually ready to withdraw on the next business day. The app shows when your tokens are back in the pool.
Rules for withdrawing
- Collateral in an active cycle can be withdrawn once the cycle closes and its tokens are back in the pool.
- Collateral you just added counts toward borrowing straight away, but it must go through one options cycle before it can be withdrawn.
- How much you can take out: any amount, as long as what remains keeps your loan within 50% LTV. To take everything, repay the loan first.
- Closing: withdrawing all collateral with no loan closes the position automatically.
Why collateral is locked during a cycle
A covered call is only covered if the shares are there for the whole cycle. If collateral could leave mid cycle, calls would be left uncovered and the pool, and every borrower in it, would be exposed to unlimited loss on a rally. The lock is what keeps the strategy covered.