Let's say I wanted to sell some puts periodically, hoping to make some cash without selling shares.
Right now I have next to no spare cash in my brokerage account. Because, you know, I used it buying TSLA!
I think I have heard people recommend selling out of the money puts on margin, when you expect them to never be exercised, such that you're taking advantage of the fact that you have margin but not actually paying interest unless the puts execute.
I had the vision in my head that I would sell, let's say, a $500 put, for which I'd normally need $50K of cash, and the broker would use my TSLA shares as collateral so I wouldn't need any significant cash in my account and they'd just deposit the premium from the sale in my account and then I'd cross my fingers that TSLA stays up. If the put got exercised then my margin would essentially convert to a loan and I'd start paying interest.
But when I go and poke around at ETrade, it seems like you can't sell a put entirely on margin -- it appears that you would sell for some fraction like 30% cash and 70% margin, or maybe vice versa, their calculator is very unclear to me.
How is this really meant to work? If I want to sell a put with a $500 strike and thus a potential exercise value of $50K, how much cash should I expect to need in my account? (Does everyone recommending this strategy have gobs of cash sitting around in their brokerage accounts which is NOT invested in TSLA?)
Right now I have next to no spare cash in my brokerage account. Because, you know, I used it buying TSLA!
I think I have heard people recommend selling out of the money puts on margin, when you expect them to never be exercised, such that you're taking advantage of the fact that you have margin but not actually paying interest unless the puts execute.
I had the vision in my head that I would sell, let's say, a $500 put, for which I'd normally need $50K of cash, and the broker would use my TSLA shares as collateral so I wouldn't need any significant cash in my account and they'd just deposit the premium from the sale in my account and then I'd cross my fingers that TSLA stays up. If the put got exercised then my margin would essentially convert to a loan and I'd start paying interest.
But when I go and poke around at ETrade, it seems like you can't sell a put entirely on margin -- it appears that you would sell for some fraction like 30% cash and 70% margin, or maybe vice versa, their calculator is very unclear to me.
How is this really meant to work? If I want to sell a put with a $500 strike and thus a potential exercise value of $50K, how much cash should I expect to need in my account? (Does everyone recommending this strategy have gobs of cash sitting around in their brokerage accounts which is NOT invested in TSLA?)