This trade possible?

I have $4015 in my Thinkorswim account with $265 of those in cash and the rest in a stock. Never traded options before, but I want to short a XOM put (naked).

Is it possible for me to sell one Nov 06 $62.50 Put? Will Thinkorswim let me do it? Do I have the margin required? What about the same strike Oct 06 put?

Appreciate the help.

 

Probably not. But, surely ToS isn't that hard to reach and ask this question?

 

If your stock(s) are marginable and if you have a margin account and if you have approval for naked option selling and if you have the minimum equity to be approved for option trading and if TOS's margin requirements are not higher than Fed requirements (exceeding your margin available) then you'll be able to sell that naked put.

Call TOS to find out :->)

 

No, it's not possible.

 

TOS doesn't have option levels. If your are approved for option trading you can do anything. But as already stated you probably can't do the trade because of margin requirements. Why not sell a vertical spread to limit the loss?

 

Ok I asked TOS and this is what I got:

"Per your specific XOM question, the margin required to sell 1 Nov $62.50 Put for $.60 is approximately $900. The general rule of thumb is approximately 20% of the price of the underlying for naked options. As for the margin itself, you can use available cash or 50% of a stock’s value."

Where did he get that $900 though? Isn't 20% of $62.50 x 100 = $1,250?

 

Oh wow, they're really good with emails. I just sent them another email and they said 20% is just a rule of thumb, but it's usually a bit less. Guess I can make the trade!

 

You asked your broker about margin requirements for a position and they gave you an answer? Wonders will never cease.

If you try and make the trade on your platform, it will tell you the margin requirements (in the confirmation dialog box). When you click on "Send" it will either let you do it or not.

 

As already mentioned, do a vertical instead.

 

Initial margin requirement for your short put:

- 100% of option proceeds, plus 20% of underlying security value less out-of-the-money amount, if any

- minimum requirement is option proceeds plus 10% of the put’s aggregate exercise price (number of contracts x exercise price x $100)

- proceeds received from sale of puts(s) may be applied to the initial margin requirement

See CBOE margin Calculator at:

http://www.cboe.com/tradtool/mCalc/default.aspx