Clearing a covered call

I trade buy and sell futures options on the ES. The premiums received are instantly added to my account, but it is held in the commodity portion of the account, and it is not considered available funds until the contract expires or is bought back. If interest was available, I would earn it on the received premiums.

 

Just a heads up MTE, as far as I can tell, ToS uses the same clearing method as MB. I've spoken with a couple reps who have confirmed that premiums will not be added to my buying power and that they don't pay "short interest" (their term). There seem to be way too many people at these brokers who don't know the difference between writing a covered call and shorting stock. They think any product you sell should be treated the same.

I'd be interested if you could confirm whether they allow it or not.

 

the premium received should be available for you to use. are these calls in the money? if so then what they are probably doing is basically pricing your long stock at the short call price. so if your stock is at 10 and you write an $8 call then they may be holding out $200

 

thanks johnny, i see what you're saying. I think they are holding the entire premium though. Spoke with the head of their trading dept recently who agreed that the situation is unfair for traders. He basically said that Penson makes the rules and his hands are tied.

 

I'd look for a new broker. I'm about 99% sure that it's not the clearing firm that is holding the premium out on you.

 

I would assume that someone with fewer than 100 PROFITABLE trades was a rookie.

 

Yeah, I'm leaving MB, partly for the premium issue, but also because they don't offer spreads yet...?? Sometimes they say within a month, other times they won't give an ETA. Not worth the hassle anymore. I'm looking at ThinkorSwim, but can anyone confirm from their own experience that the covered call premiums are handled differently there? The rep I spoke with told me I would not receive interest on my premiums, which he called "short interest".

 

premium from covered calls should be available for trading right away and for withdrawal the next day. provided this isn't an IRA, or proceeds needed to meet a margin call. it's really no different than depositing cash into your account. if they make you wait a day then I can buy that too since you can't day trade using those funds.