what is the capital requirement for selling puts? say if you sell
10 contracts of Jun 110 p, do you need to have $110,000 in your
account?
First of all, it's tough to get approval to write naked (uncovered) options. Many brokerages require equity of $50K or $100K, and then allow writing of options that, if exercised, would require equity over and above that floor sufficient to buy the underlying stock at usual margin requirements.
Example: I have $50K cash in my account. I apply for and am approved to write naked options. I can't actually sell any, though, because I have only the bare minimum for that level of options trading.
Example 2: Same but I have $75K cash. I can sell 20 March 25 puts on stock XYZ, because if the stock were put to me, I'd have to pay 20 x 100 x $25 = $50,000 to buy it, and my $25K in equity over the $50K floor, margined to the brokerage's maximum 50%, lets me buy exactly $50K of marginable stock. |
