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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: ---------- who wrote (647)	2/1/1998 11:48:00 AM
From: Esteban	Read Replies (1) \| Respond to of 2241

Doug, Ah, so the brokerage does require you to have the cash or marginable stocks in your account to cover the potential assignment. I understand now that you do have a capital outlay when you write the put. Are you charged margin interest on the potential assignment? If you already have the cash in the account, is it placed in an escrow account and do you earn interest on this money? I thought it might be like a futures account where you would get a margin call if your account became overleveraged, but are not required to keep funds in your account to cover the entire cash value of your contracts. Regarding your previous TBR example and related to my original question about option pricing at different strike prices, here's another question. You choose to write a put that is 2 strikes into the money because you feel the stock is going to close above 115 by expiration, right? If you felt the stock would range trade during this time you'd choose the 112.5 for the better time value premium. Doug, I appreciate your thoughtful responses. Esteban