You have lost $399 minus premium received.
Broker silently changed the conditions...
- Thread starter earth_imperator
- Start date
well yeah. This is what I was trying to explain to him. He keeps the premium but he can lose the complete strike. The broker secures the complete strike via the premium and any additional funds required until he closes the trade.
The required amount is as follows:. In a cash secured account WHICH IS THE CASH ACCOUNT
it is the strike price X100 minus WHATEVER YOU TAKE IN FROM SELLING THE OPTION.
e.g.1 strike price at 6 stock at 8 option price at 1 the account must have $500 in the account
e.g. 2 strike price at 6 stock at 4 option price is 3 the account must have $300 in a cash+$300 premium received secured account e,g, cash account or IRa account.
again, requirements are different for a margin account.
cash secured means that the broker can never lose a penny.
it is the strike price X100 minus WHATEVER YOU TAKE IN FROM SELLING THE OPTION.
e.g.1 strike price at 6 stock at 8 option price at 1 the account must have $500 in the account
e.g. 2 strike price at 6 stock at 4 option price is 3 the account must have $300 in a cash+$300 premium received secured account e,g, cash account or IRa account.
again, requirements are different for a margin account.
cash secured means that the broker can never lose a penny.
I assume you're talking to him. He's on ignore.
Trust me it's pointless, don't waste your time.
I agree, but TDA asks for "StrikePrice * 100" to be able to open the position. That's the problem...
Other brokers ask only for "StrikePrice * 100 - PremiumRcvd"
It is a problem. Broker-dealers can make their own policy which can disadvantage you.
Seriously, you need to be polite in your responses. Otherwise people will attack you even when you are right.
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A $10 put will not be selling $10.70 unless the stock was near zero. You are correct. The cash received is subtracted from the cash secured requirement but it has to stay there to meet the initial requirement unless you have additional cash in the account.
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I complain b/c the change happened suddenly, and they even don't admit it!
These people are scum, nothing more. I don't need them and am blocking them completely, but this scum can't do it w/o spamming in my threads. It's a problem of this buggy forums software of ET.
That is not correct in a cash account. There cannot be any additional required even if the stock goes to zero There is a different issue regarding the possibility of early assignment and the customer ends up with a loss. That is a discussion for another day.
That is NOT correct. For a cash account, the requirement is ALWAYS the ENTIRE strike price and NOT strike price - premium. The notion that you can never lose more than the strike price - premium is only true from the put seller's point of view. What about the buyer of the put? Are they supposed to get only strike - premium that the short seller just walks away with when they exercise the put when option contract says they are supposed to get the full strike price?? And if the put seller should not have the money later on to put up the premium that he took, so is the broker supposed to foot the premium for the put seller??
And this is the policy not just by whatever broker that the idiot has his account with. It's been the policy with all brokers since the beginning of time. Below is the requirement for naked short put by IB for a cash account:
And this is the requirement from TD Ameritrade for naked short put for cash account:
"Writing a Cash Secured Put: The put-writer must maintain a cash balance equal to the total exercise value of the contracts. If the option is assigned, the writer of the put option purchases the security with the cash that has been held to cover the put."
https://tlc.thinkorswim.com/center/...Requirements-on-Single-Leg-Options-Strategies
This is what OP doesn't understand. An option is a business contract. It's not some kind of game. It carries responsibilities that you are expected to fulfill and nobody is going to fulfill it for you. If the OP can find a broker that lets him walk away with the premium and not fulfill the full obligation as a put seller when the time comes then he's free to leave his current broker and go to another broker.
