<<<<<<
Thanks for the reply. Who's rule is it that you need a margin account to sell a cash backed naked put? Is this an SEC mandate, or is it just what all the brokers do? It seems really odd that with all the proof in the world that selling naked puts with 100% cash to back them up is no more risky (even less) than writing covered calls, that the "system" allows you to do one but not the other. I would argue it's a lot safer than buying stock because you obligate less money to begin with, so if the stock fell apart you would be better off short the put than owning the stock. I guess some things are just a mystery.
Dan
>>>>>>
Brokerage houses don't care about the risk to you, they care about the risk to them. When you own stock, that is secure, they hold it for you. In terms of investors, you're correct, but that liquid cash in your account can sometimes be "taken" away, if you have checks associate with it, withdrawls, margin calls, whatever. The stock is nice and pretty for them, no risk. As long as the cash is there, and they are allowed to hold it, there shouldn't be a problem (in my eyes). I assume they have gotten burned by people using that cash to buy stocks which have tanked, then couldn't cover their naked put. This is much more risky than owning a stock and writing calls against it.
Ryan |
