A client maintaining a “Cash” type account is allowed to write, or sell, put options if the option contract is cash secured. A cash secured option contract is one where the seller has deposited sufficient funds with the broker, which the broker then sets aside, to pay for the stock in full in the event the contract is assigned. The amount of cash required is generally equal to the option strike price multiplied by the 100 shares to be delivered at assignment (or other amount necessary to pay for the deliverable in full if the contract has been adjusted due to a corporate action).
What is the collateral requirement for a cash secured put?
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Determining buying power
Buying power serves as a measurement of the dollar value of securities that one may purchase in a securities account without depositing additional funds. In the case of a cash account where, by definition, securities may not be purchased using funds borrowed from the broker and must be paid for in full, buying power is equal to the amount of settled cash on hand. Here, for example, an account holding $10,000 in cash may purchase up to $10,000 in stock…
Can I buy stock on margin in an IRA account?
As the assets in an IRA account are not eligible to be pledged as loan collateral, and stock ordinarily serves as the collateral securing payment of a margin loan, account holders are not permitted to buy stock on margin in either a Cash or Margin type IRA account. All stock purchases must be paid for in full with cash. In addition, other transactions which require a margin account such as shorting stock and selling uncovered options are not allowed in either a Cash or Margin type IRA account…
How does a corporate action affect my option contract?
If a corporate action such as a merger, acquisition or spin-off occur before the expiration of your contract, the clearinghouse will typically announce an adjustment to the amount or name of the security deliverable under the contract. When such adjustments occur, the party delivering the underlying (i.e., short holder of a call or long holder of a put) is obligated to deliver the adjusted security at the option strike price…
Why can't I open a new position in an Adjusted Basket option?
After a corporate action, the Options Clearing Corp (OCC) may create a new underlying for open option contracts to represent the Adjusted Basket underlying that can include the new stocks and/or cash. IBKR only allows closing orders for an option contract that had the underlying deliverable adjusted by the Options Clearing Corp (OCC). The OCC publishes Information Bulletins outlining the terms of adjustments on its…