Selling naked put on US stock, with CHF cash as collateral

For years with Interactive broker, i’ve been selling naked put on US stock, with CHF cash as collateral. I wonder if there is any other broker as an alternative for doing this?

AFAIK for swiss investors this is by far cheapest option. Big banks charge 100s to execute option trade. I’ve seen somebody doing this via Swissquote, but not sure of their condition.

Seems you have lengthy experience in this topic. Would you share you experience in these regards:
What is the goal of your strategy? Beat the market, reduce volatility or else?
What is your strategy? Eg. Option duration, entry/exit rules, expected return.
What options do you trade? Eg. Index/single stock?
How much collateral do you allocate? IB charge negative interest for >100k chf.
Which canton do you reside and how do you deal with tax declaration and potential of being flagged as professional trader? Eg. do you declare all trades/profits?

Thanks

cheap or expensive is the second question I want to ask later. First question is what are the alternatives where this is possible? For example, you mentioned swissquote. Is it possible to sell put on US stock, with CHF cash as collateral?

I am not experienced at all. haha. I mainly sell puts on blue chip stocks with one month until expiration and quite far out of money. For example MSFT 200put expiring in February. Discussing the strategy worth a whole new thread and I am still asking what other brokers supporting doing it. hahah

Can you explain why you want to use CHF as collateral? If the stock and options you are interested in trade in USD, why would anyone accept another currency as collateral? A swing in exchange ratios could make your collateral value fall under the required amount. Also, if you get assigned on the put, you will need USD to buy the shares.

I don’t think it’s possible to achieve what you are looking for. What would be the upside for this approach? Think about it from the broker’s point of view too, sounds like there would only be risks or complications for them.

On Swissquote: Yes

(Disclaimer: Can’t say with 100% confidence as I have assets in multiple currencies, but my main account currency is CHF and I only ever see my margin requirements calculated in CHF.)

See their pricing. It’s about 2.00 to 2.50 CHF/EUR/USD all-in per option. If you let yourself get assigned, it’s typically about twice the cost of simply buying the asset (i.e. it’s cheaper to close the option in time and buy the share at the lower price if you really want to own it).

I have the exact same thing on IB (base currency and margins etc. displayed in CHF) but the collateral still needs to be on the USD account. Were you able to sell a put without having enough in USD?

Edit: I’m assuming we are not talking about margin accounts per se because the question was about cash secured puts. @Jiamin: can you confirm that you actually mean a 100% cash secured put instead of a fully naked one?

Yes. Works with USD assets without USD cash, confident but not 100% sure it also works without USD assets as long as you have assets in general. Of course also speaking of 100% cash/asset secured puts only, not truly naked ones.

Hi,

For me, selling naked puts doesn’t make any sense… You sell call options “naked”, but puts??? When you sell a put you never have the stocks. But anyway, I’m doing that every month.

I sell puts for stocks, ETF’s etc. month by month.

I do for stocks I want to buy. e.g. If this month I want to buy VXUS, I sell a put of VXUS close to the price.

I win always because when I sell the the put, I do for less money that cost, so, if in one month they assign me the 100 stocks, I’ll have for less money that today and I got the premium on top.

If it finish out of money, I got the premium and I repeat again the strategy. Last month, I got around 800$ in premiums.

BTW, I use TD and I pay 0.66 $ for each option…

Margin in IB does not depend on a specific currency but on the assets you own (cash, stocks, etc.) and as long as you have enough excess margin for the option you sell that’s enough to trade. Of course if there’s a huge volatility on the currency of the assets you own and all of a sudden you lose half of your available margin you will face a margin call but that’s a general thing.

Also it is worth noting that you do not even need to have a cash collateral value in front of your put option short, if your portfolio provides enough margin to cover the margin requirements of your trade you will be able to execute it.

Your post is misleading: On the one hand you say that selling puts does not make sense but that’s the strategy you seem to implement ^^.

Also be careful when mentioning selling naked calls, i.e. selling a call option without having the underlying collateral in your portfolio as this can theoretically lead to unlimited losses and it’s not something one should do as a standard strategy. The risk of selling naked puts on the other hand is limited by the value of the strike * option quantity

I have a cash account on IB and not only do I have to have the full collateral for the put in USD but it also has to be settled. After a forex trade I can immediately buy stocks but I have to wait until the next day to trade options. Ultimately I still see my maintenance margin in CHF.

Sounds like the requirement for a margin account are different (not surprising) and I was wrong about it not being possible.

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Hi,

No I wanted to say that for me, selling a put option cannot be “naked”… just that. For me “naked” means that you don’t have the underlying security and I never have the stocks when I sell the puts.

Looking for the correct description in Investopedia, I see that naked puts exists and the descriptions is selling a put without holding a short position in the underlying security. Sorry for the misunderstanding.

I only sell covered calls or sell put options if and only if I have the money to buy the stocks, if not, I wait until the next time I have the money. I never play on margin.

Well, it is definitely possible as I am doing it with interactive broker.

There isn’t much benefit, except
— commission of currency exchange,
— bid/ask spread of currency exchange,
— international wiring fee, if it applies.
— trouble of deciding how much should I exchange
— unhappy about USD sitting in idle and dropping value.
— all of above if I ever consider transfer it back.

It probably won’t save too much money but definitely saves a lot of trouble. Imagine if I want to transfer part of my CHF salary every month into the broker. I don’t want to convert them all into USD just use it as collateral, not knowing when to convert it back. If all my deposit is in CHF and all the profit (from selling puts) is in USD, I would be much happier. Taking assignment would be another issue. It is rare. It happens only if I want it this way and there won’t be USD sitting in idle.

wow. cool. Thanks!!! After knowing this price, I would keep looking. haha. But thanks

To me, naked put doesn’t mean it is cash secured or not. It just means it is not a covered put as in
Naked call vs covered call
Naked put vs covered put

To me, selling naked put can be “cash secured naked put” and can also be “not cash secured naked put”. Well, it is a bad name I just invented. haha. But you get want I mean. It just means margin needs to be used when taking the assignment.

When referring to selling naked puts in the subject, I just meant selling naked puts, not either of them. I guess to the broker, it is definitely not cash secured because I have 0 USD to take the assignment, but I do plan to have enough CHF for the assignment.

Selling covered put means selling a put and short 100 shares of the underlying. And therefore, selling naked put does make sense. It just means there is no shorting 100 shares. hah.

Ah, I just saw you’ve written it yourself. haha. Anyway, we are doing the same thing. haha.

This is exactly what I find IB to be attractive and hence the question of this thread, any other broker offers such feature?

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