As long as you are within SIPC limits, you are o.k. But your cash does get to sit earning today's princely money rates. <G> At one firm, we agreed that I would keep half of the amount of stock purchase in cash. Since cash paid nothing, I bought a two year T-note (which doesn't pay one heck of a lot, either) to collateralize my two year Leap. That made them nervous. But, I've learned to live with them being nervous.
One of my clients at Smith Barney wrote a naked call Leap, which is much riskier, as the limit of the loss is infinity. A couple of years later, the stock on which he'd sold the call was nearing bankruptcy and the call was about to expire worthless. I got a nasty email from my new compliance officer telling me I had to call the client and explain why he was losing all of his money and then report the conversation back to her. After a laugh and calling the client, who was and is a friend, I turned to polite mode and explained to the ops cop, as nicely as possible, that what was about to happen to the position was the very best thing that could happen, and that the client was very pleased. If she hadn't been a hot woman, I would have blasted her. And once I found out she was happily married, I thought about doing it, anyway. <G> |
