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Strategies & Market Trends : Selling Puts: Have Cash Will Travel -- Ignore unavailable to you. Want to Upgrade?

To: Tom K. who wrote (1149)4/10/2000 3:23:00 AM
From: Tim O.  Read Replies (1) | Respond to of 1235
 
when you sell a PUT and cash collateral is required, the broker does not pay any interest on the cash collateral, only on free cash

thanks for the detailed response, Tom. i need some help in figuring out free cash.

let's say i have 10,000 cash + 10,000 in stock (margin acct).
i short 1 put for +1,000 with maintenance margin of ~ 3,000.
total balance becomes 11,000 (after settlement).
how much will be free cash? 8,000, 10,000, or 11,000?

i guess my question is if I have stock + cash, couldn't the collateral come from the stock?

appreciate your help.

Tim



To: Tom K. who wrote (1149)4/10/2000 11:47:00 AM
From: OX  Read Replies (1) | Respond to of 1235
 
>>>the broker does not pay any interest on the
cash collateral, only on free cash;<<<

I assume you're referring to Brown?
PCM pays interest on all cash (collateralized or not), also on the proceeds of the short.
not that I would recommend them tho :-)
I'm thinking of moving some of my NP acct back to Brown.


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