Huh? Assuming OTM puts, if the margin requirement is 20% of the strike, do you really think that the premium received is going to exceed the margin requirement and increase your cash availability? Your cash is going to be tied up supporting your short put positions. With all due respect, you should consider doing some serious reading before diving into the deep end of the pool. Based on your questions, your current understanding of margin and option strategies needs a lot of work and you're going to find that there's no water in the pool right now (grin)
That's way off man. You can't use a sold put as collateral for anything. You sold it, you didn't buy it. Think about this idea for a minute. Brokers won't give you additional leverage on options. If you buy an option, you are restricted to the cash in your account. If you sell an option, you'll be able to sell even less than that. Options are geared already, they don't need to be leveraged too.
I cannot help you if you do not try to analyze what we said. I asked you to do some homework in my post and you still have ignroed it. 20% of the underlying strike value and the proceeds of the put short are applied to the requirements = if margin requirement is $1,500 and you take in $300 in cash, they apply the $300 against the $1,500 so you kick in only $1,200 of your own money and ALL $1,500 is set aside in your account not for touching. Do the example I listed above in my earlier post.
LOL. That's what some of us call monkey math (g) I'm not sure what that means. A $50 strike or $5,000 in premium received? Either way, if you only have $1,000 in cash in your account, no broker is going to let you short $5,000 worth of anything. So let's assume your account contains marginable securities and $1,000 of free cash. Let's do something more realistic. With a stock at $50, you short 1 naked put for a credit of $2. Your margin requirement is $1,200 but that can be reduced by the put proceeds. So now, you have $1,200 in your account and a margin requirement of $1,000. That means you now have $200 available to buy calls. That's about $5,800 short of your calculation. By all means, ask questions. But don't trade until you understand a lot more.
optionscoach, as i posted earlier its clear your broker has different requirements than mine, also your example does not make sense spindr0, you were the one who posted earlier that also, commiebat said CALLS/PUTS (options in general) are not marginable securities, but stocks ARE. finally, from this, im gunna use the example of the actual chain i am looking at. So say the PUT is worth $4.85 (LDK Nov 40 PUTS) $4.85 + 20% ($38 market underlying) - $2 (out of the money amount, 40 - 38) = $10,45 margin requirements the $4.85 is credited to cash, so its actually a $5.6 dollar margin requirement, which is 115% of the value of the PUT .. compared to long CALLS/PUTS which are 100% market value (so, you pay a little extra due to the increased risk of naked calls)
So what you saying now is completely different than what you first started saying so hopefully you understand how the margin is calculated. You first few posts were implying you can sell the put and buy a bunch of stock with the proceeds.
thanks again for replying, well my first posts were me confused trying to figure out what is going on. Since then I hope I have come closer to understanding what is going on. Trust me, I haven't dared to even touch this on my real account since I am learning from the posts in the thread. I am using this chart as my guage for naked short put info im not sure how to compute the "In The Money" amount however .
Here is great tip. Most brokers like IB let you set up an order and they show you the margin requirements before you can transmit the trade. Do an order for 1 short put that you used in your example and see what the margin requirement is but just do not transmit the order.