Does cash that is held as options collateral (for example, cash to cover a cash-secured put) typically earn interest (in a sweep account, etc)? I recently inquired about whether or not Robinhood's upcoming Cash Management account offering would pay interest in this scenario. Robinhood support said that cash held as options collateral is considered "invested cash" and hence not a candidate for interest bearing sweeps. That seems like a strange distinction to me. If I set aside cash to potentially purchase stock, I would accrue interest on that cash until I actually purchase the stock. Selling a put places me into a similar situation: I'm setting aside cash to potentially purchase stock; it's just at the behest of the owner of the sold contract, who may decide to exercise. So why is this cash considered "uninvested" in the former scenario but "invested" in the latter scenario? How do other popular brokers handle this?
In this case your cash is held in a sweep until you're ready to use it. The cash collateral for an option is margin for the purchase or sale of the contract. You are putting up a portion of the total contract value or risk. As a result this can be seen as "invested" capital because it's tied directly to the instrument you used it on. I checked the CBOE option margin handbook and there's no restriction on paying (or charging) interest on margin. This is probably broker dependent given that.
So typically (and RH certainly isn't typical) you should receive interest on the credit balance of your account. So if you have $100,000 in your account and you sell 10 puts for $30 each you now have a credit balance of $130,000 and that is the amount you would receive interest on. Say your firm requires you to keep $50,000 to hold this position. Your option buying power would be reduced to 50,000 (form 100,000), but your credit balance for interest purposes is $130,000.