I wrote 15 cash secured puts on GE (strike 13 feb)
- Thread starter KINGOFSHORTS
- Start date
Quote from cfelicio:
well, if you have unlimited supply of money, you can always roll your puts no matter how low GE goes... otherwise say hi to your margin calls
don't a lot of brokers not allow you to do this?
they are still naked.
If you wrote puts secured by cash, and the stock crashes hard, you can wait until expiration to have the stock put to you at that strike price. are there any situations where the broker would force you to buy back the puts instead of having the stock put to you?
A couple of comments (hanging late waiting for my brother). The naked puts will likely be fine. The dividend yield (if they don't cut or cancel) would be 10%, not bad.
A naked put is a naked put, meaning that you may be assigned stock. The reason we don't, as a trading firm, allow straight naked puts for our traders is that WE (BT) do have enough cash to absorb anything put to us, but the trader themselves may not. And, since we're not retail, submitted orders do not route through the traders account to check for adequate cash to cover any early exercise or assignment...leaving the Firm vulnerable.
So, the "discussion" is right on both counts IMO. Naked is naked, as it relates to potential outcome. And, yes, "cash covered" is only allowed when there is adequate capital.
Right now we're short quite a number of Jan puts that we're concerned about, LOL. We'll see....maybe we'll do an LBO of GE.
Don
A naked put is a naked put, meaning that you may be assigned stock. The reason we don't, as a trading firm, allow straight naked puts for our traders is that WE (BT) do have enough cash to absorb anything put to us, but the trader themselves may not. And, since we're not retail, submitted orders do not route through the traders account to check for adequate cash to cover any early exercise or assignment...leaving the Firm vulnerable.
So, the "discussion" is right on both counts IMO. Naked is naked, as it relates to potential outcome. And, yes, "cash covered" is only allowed when there is adequate capital.
Right now we're short quite a number of Jan puts that we're concerned about, LOL. We'll see....maybe we'll do an LBO of GE.
Don
The answer is "possibly" because of the fear (by the Firm) of early exercise of the puts, prior to expiration. But, again, if there is adequate cash to cover the entire amount, you could probably fight the request.
Don
thanks for the info Don. if you at all times (until the options expiration date) keep enough cash to cover buying all the shares at the strike price of the all the puts you sold, does the brokerage have any reason to give you a hard time?
at least this knucklehead figured out that one option equals 100 shares. lol
his INTC thread was an instant classic.
his INTC thread was an instant classic.