Selling Put Options? Cash Versus Margin Account...

Cash account or margin account?

That's the question.

If you're selling put options though, you definitely need to decide if it's going to be a "cash" account or a "margin" account.

So, what's the difference?

A lot, actually.

In this video I will not only give a refresher on the basics of put-option selling, but also the different types of accounts you can use and how it can affect your portfolio balance.

Send us any questions you have, or leave a comment if you wish.

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DISCLAIMER: This video is for educational purposes only and should not be construed as financial advice or a recommendation to buy or sell any security or investment. Consult with a professional financial advisor before making any investment decisions.

DISCLOSURE: Some of the links in this description lead to products & services I regularly use and think you might find helpful. Wherever possible, I use referral links, which means if you click one of the links in this video or description and make a purchase, I may receive a small commission or other compensation.

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[billhaskins]

I am blown away not only by the information Lee provides but also by the fact he took his time on a Sunday evening to answer my question that I was able to place on his website. Hands down the best investment advice on YouTube!!!

[OptionC.]

Thanks Lee. I think this video will help others, who are hesitant to trade in a margin account, to finally take the first step and make a trade. I was on the same boat as people kept telling me that margin accounts are “super risky” and to avoid it like the plague.

Now that I’ve been trading (selling options) for some time, trading in a margin account has exponentially increased my win rate by enabling me to execute high probability trades.

[geoffglass]

Thanks Lee.
About 10 years ago, I bought your book. Best thing I ever did!!
I never knew about you before I bought that book. I have been selling Canadian & US put options ever since.
Then today I discover that you are on the internet.
I want to thank you for teaching me this strategy and consequently I've made a lot of money.
I'm looking forward to learning more from these podcasts you are delivering.

[jewlcool]

Well done Lee. I am teaching Puts to my greanddaughter. I have forwarded your lecture. You say it succinctly ! I have been trading options for years but learned something new from both videos.

[AJ-ANS]

Lee, I am enjoying re-watching some of your older videos. Still very helpful [evergreen]. Thank you. I just sent "Lee" an email about your paid newsletters.

[opoknock]

So clear even I can understand, and that's saying something.

[solomoon]

Thank you, sir. It is really helpful. I wish you success I all you do.

[HanhDoan-sn]

That is great lesson for stock trading strategy. If we should consider tax variable? thanks for your lesson

[OptionC.]

Also, just signed up for the options letter!

[nickedwards]

Great video, learned a lot here, thanks!

[LMF-ctlt]

This is the best explanation margin and maintenance that I have ever heard. I now have a much better understanding.
Does the broker take into account the stocks that you hold to use for collateral when approving for margin?
Thank you for this video.

[aaronsarinana]

Very useful information! Next video: where/how to find stocks to sell puts on! ... Fundamentals? Technical analysis? Screeners? ... thanks!

[famtebbe]

But what about buying power. How to manage that?

[CalebBartholomew]

One thing that you don’t go over in your book (maybe some older videos you do) is how to fix an options trade gone bad. Sure you can close out a trade for a loss. You can also turn it into a spread or a ratio. The spread helps because you can do that in a cash secure account too. The best way to hedge against a falling stock when you’re short a put is to short the stock too. I think this goes to what another comment about is buying power. Like you wouldn’t want to use all you BP on selling puts so if you had to hedge or exit you can. The other thing with the cash accounts especially retirement is selling covered calls. You definitely hit on that in your book

[michaelfriedman]

The margin requirement doesn’t need to be in the form of cash. It can also be other marginable securities like stocks or bonds.

[neonk]

Hi Lee, great video, thanks. I have a small question. If I write puts on margin, and the market moves against me, is it possible for me to take assignment on those puts, and thereby end up holding the underlying stock with the same amount of margin, rather than being margin called?

[flyingtiger]

thanks for the informative video! i subscribed to you channel...
question: if you use margin instead of cash as collateral when sell puts, you could end up with daily margin interest that accrues on your margin loan...guessing short dated options are manageable but for more long dated options the daily margin int could very well eat into your entire premium...is that right? if so, having available cash sitting in your brokerage seems better esp if its in an interest earning account

[niasuh]

Thanks Lee. This is an amazing video ! I do have a question and would appreciate it if you respond back. If I have a margin account and I don’t get assigned the put, do I still pay interest? I assume I would only be charged interest if I get assigned the shares.

[Kobe-]

So essentially if I am selling put options on margin, I still need to have X amount of cash on hand in account to maintain cash requirement, 10-20%. Lets say I have a long term portfolio, and I saw an opportunity and used my margin to add, planning to cover my margin in next few months. So if im -5k on margin, that means I have no cash. This means as soon as I sell a put as in your example, I would have to cover my 5k margin to zero out, plus add an additional 702 dollars?

[memories-fhfd]

would have loved you to demo the same in a cash account so we can see how much it would cost to sell that put