I would like to open an account at IB. I read (on IB) that when you write a put, you are required to have the aggregate of the underlying price available in your account. ex: write ten puts at underlying of $70.00 ... must have $70,000 available in your account. My question: Is this $70,000 then restricted, or is freely available to trade?
I too am an IB client. I haven't written any puts in over 3 years, but that wasn't the case when I did so. Go to the IB website and check out the link on margins. Everything you need to know is there. Edit: I just looked, you're referring to cash account requirements. Margin account is different.
bundletrader is correct. in a margin account you do not need to put 100% of the stocks value. details are here: http://www.interactivebrokers.com/en/trading/marginRequirements/stockIndexOptions.php?ib_entity=llc
I see. I guess I should be more specific... In either case, margin or cash account, is the maintenance amount restricted from further trade, or do you just need to maintain the amount in your account?
you need to maintain that in your account. Of course that amount will change (+/-) depending on your other trades.
def, i think he's asking 2 different questions. one about covered and one about uncovered puts. uncovered puts are not allowed in a cash account (at least hopefully you guys aren't allowing it)which is why bundle thought he was asking about a cash account.
I believe they (IB) do allow naked put writing... it says on their account requirements section: Short Naked Put - MARGIN ACCOUNTS - 100% * option market value + maximum (((20% * (underlying market value) - out of the money amount), 10% * strike price, $2.50 * multiplier * number of contracts). 20% above is 15% for broad based index options. Short sale proceeds are applied to cash. Same rules as cash for IRA Margin Accounts. CASH ACCOUNTS - 100% of the aggregate put strike price. so I was just curious if this amount was restricted form further trade.