Interest on margin requirements

Discussion in 'Options' started by Eliot Hosewater, Sep 2, 2007.

  1. What typically happens to the interest earned on the cash set aside for margin requirements on option positions? Do brokers usually keep it or is it passed along to the client?

    I sent this question to ThinkorSwim, but haven't heard back yet.
  2. With most brokers that I know the client still gets the interest.

    One notable exception is that in an IRA some brokers screw you on the interest on cash secured puts. About 18 months ago I learned that OptionsXpress reduces the interest on such cash to just under 2%. At the time my emails to TOS showed that they were slightly worse. I think the problem is that the security must be in cash and cannot reside in a MM fund. Interestingly, Schwab and Fidelity tell me they don't have this problem.

    Since then I buy covered calls instead of NP's in my OE IRA. This has given me a couple of thousand dollars improvement in my bottom line since I discovered this issue.

  3. Thanks Don,

    I finally heard back from TOS. They do pass the interest into the account.