Picture this: you’ve sold ten Amazon (AMZN) USD 150 cash secured puts to collect premium. Overnight, the shares dip, and when you wake up you own 1,000 Amazon shares—an unexpected USD 150,000 position. Or fast forward to Friday afternoon: two hours before expiry, Saxo’s risk engine suddenly reserves cash against the very same contracts, sending your lombard utilisation through the roof. Lombard Loan is the flexible credit line that can bridge both situations without forcing you to liquidate other investments.
Assignment 101—what really happens when a short put is exercised
- Exercise notice: After the close, the option holder chooses to exercise.
- Share delivery: On settlement morning the 1,000 AMZN shares appear at the strike price, creating a USD 150,000 debit.
- Automatic Lombard Loan: If your cash balance is short, Saxo instantly finances the gap with a Lombard Loan (if activated).
- Risk rating matters: The incoming shares carry Amazon’s live risk rating—typically 2 on Saxo’s 1to6 scale. Saxo applies a haircut to that rating; the lower the rating, the larger the portion of the purchase cost that can be financed.
Result: you’re long Amazon and short cash, but still in control.
The two hour expiry window—why utilisation can spike
Saxo’s expiry procedure starts exactly two hours before listed equity options expire. From that moment the risk system begins minute by minute reserving of the cash needed to buy the underlying shares if your options finish in the money. The reserved amount shows up as additional Initial and Maintenance Margin, often producing a sharp but temporary utilisation jump.
If your available collateral is thin, two things can happen:
- Saxo closes only the expiring options to free up lombard.
- In tougher cases, other lombard positions may be closed as well.
Enabling Lombard Loan beforehand means the required cash can be financed automatically, letting you ride out the two hour window—or take delivery—without emergency transfers.
Funding choices at a glance
| Speed | Cost & flexibility | Best for |
|---|
| Cash on hand | Instant (if already settled) | No interest; reduces buying power | Planned assignments or small trades |
|---|
| Saxo Lombard Loan | Automatic & instant | Daily floating interest; repay any time | Surprise assignments, expiry window spikes |
|---|
| External SBL line | Days to draw | Bespoke rate; separate custody | Large, long term leverage |
|---|
Speed often decides the winner: Lombard Loan requires no paperwork and appears the moment the debit hits your account.
A worked example—ten AMZN puts, assigned
Before assignment you hold USD 25,000 cash and no stock. After assignment:
- 1,000 AMZN shares at USD 150 each = USD 150,000
- Saxo Lombard Loan (≈50 % financed) = USD 75,000
- Equity unchanged at USD 25,000
- Utilisation ~70 % (conceptual—actual value depends on Amazon’s rating and haircut).
With half the purchase automatically funded, you have breathing room to decide your next move—provided you respect the risks.
Key risks to watch
- Early exercise around dividends: High dividend names often get exercised before ex date.
- Expiry day cash squeeze: If utilisation is already high, the two hour cash reserve can trigger forced closures.
- Concentration risk: 1,000 Amazon shares may dominate your portfolio; a rating downgrade shrinks collateral.
- Rate shocks: Lombard interest floats; higher reference rates can erode returns.
- Behavioural traps: Hoping for a rebound without a plan can turn a short term bridge into a costly anchor.
Turning funding into opportunity
- Covered call exit: Write out of the money calls to generate premium that offsets daily interest.
- Delta neutral overlay: Hedge the new long delta with NASDAQ or S&P futures while you think.
- Rate hedge: Expecting higher funding costs? Offset with Euribor or SOFR futures.
Used actively, the Lombard Loan works for you rather than against you.
Five point management checklist
- Keep a buffer: Target utilisation below 80 % so expiry reserves or price gaps don’t tip you over 100 %.
- Define a holding horizon: Know how many days of interest you’re willing to pay.
- Set an interest stoploss: If costs hit a preset dollar figure, act.
- Plan your exit: Decide upfront whether you'll sell, roll, or keep the shares.
- Monitor ratings & the 'expiry badge': Your platform shows a clickable badge four hours before expiry plus real time risk rating alerts.
Compliance and tax in brief
Interest on investment loans is tax deductible in many EU jurisdictions—check local rules. MiFID II transparency means your dashboard always displays live utilisation and expiry day reserves. Borrowed funds must finance securities only; withdrawing them as cash violates terms.
Ready to activate?
Activate Lombard Loan from your Portfolio dashboard, fill in the short questionnaire, and you’ll be equipped the next time a short put—or a last-minute expiry spike—tests your buying power.
Lombard Loan is a precision tool. When you combine clear buffers, a structured exit plan, and Saxo’s real time lombard indicators, you can turn options surprises into manageable—and sometimes profitable—opportunities.
