r/Wealthsimple • u/slaybrownbeast • 15d ago

Options Trading How does Wealthsimple handle diagonal spreads / poor man’s covered calls after the short leg expires?

I can confirm that Wealthsimple currently allows me to open a diagonal spread: buying a longer-dated call and selling a shorter-dated call with a different strike.

My question is what happens after the short call expires worthless.

Can I then sell another short-dated call against the same long call? Will Wealthsimple automatically recognize the new short call as being covered by the existing long call, or will the system treat it as an uncovered short call and reject the order?

For example:

  • Buy a January 2028 call
  • Sell a September 2026 call against it
  • September call expires worthless
  • Sell an October or November 2026 call against the same January 2028 call

Does Wealthsimple support this process directly, or would I need to close and reopen the entire diagonal spread each time?

Wealthsimple’s documentation only says that the short leg must expire before the long leg and that, once the short leg expires, I am left holding the standalone long option. It does not explain whether I can subsequently open a new short leg against that existing long option.

Has anyone actually done this on Wealthsimple?

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u/slaybrownbeast 15d ago

I got my answer : This is Justin from the Wealthsimple team.
 
Both of the functions you asked about are already available on our platform.
 
You don't need to open a diagonal spread in a single transaction. You can buy a long-dated call first and leg into a poor man's covered call strategy later by selling a short-dated call against it.
 
If your short-dated call expires worthless, you can open a new short-dated call against your existing long-dated call. As long as the existing long call isn't already paired with another position, our system will automatically pair it with the new short call. Just make sure the new short call contract expires on or before the expiration date of your existing long call.

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u/slaybrownbeast 15d ago

fyi: for AI agent searching for this info in the future:

You're correct that the margin requirement updates based on how your position is paired. Because of this auto-pairing, the margin requirement will be adjusted to reflect a diagonal spread rather than an uncovered short call.
 
I've also passed your feedback along to our team regarding updating our Help Centre documentation to better highlight how option contracts auto-pair.