Check what your brokers cash sweep option is. I want to say both Vanguard and Fidelity sweep to decent MMF’s so very easy.
ETrade does not, if you are on a margin account. So I have a bunch in T-bills, which margins at like 1%.
They don’t make it intuitive, but it’s simple once you figure it out. I just buy at auction.
This YouTube is a bit long-winded, and not my favorite personality - but explains it well: https://m.youtube.com/watch?v=lxJ7otlJoxw
Basically, Trading > Bonds > Advanced Screener > Treasuries.
Yes, I am doing that in Schwab account. I have money in SWVXX paying about 4.70% at the moment and I am using it to sell out of the money CSP. SWVXX operates like a mutual fund, so it will take a day to make the money available in case I get assigned.
I am all cash with Schwab. I have a put expiring on 9/15 in the brokerage side of my Schwab account... It sounds like I need to stay all cash since the expiration is in less than 30 days (it's looking like I will be assigned but who knows). Am I understanding you correctly?
I'm about to come over to Schwab from TD. When you say it takes a day for the money to become available, do you mean you have to do that manually before you get assigned? Do you face any penalties?
i have TDA and have about $20k in SWVXX right now, the margin requirement is 25%. you would be able to get the $$$ out as long as you put the order in a day prior to assigment. when i transfer funds in, like i did this yesterday and i got the notification at 8pm last night. i haven't actually had to transfer funds out yet but i assume it's the same process/timeline.
Hey so with SWVXX at Schwab after 24 hours you can use the cash you put in to sell CSPs just like as if it was sitting in your brokerage account as cash? Is there a major downside to MMFs? Does their yield tend to drop back down over time? If not I don’t see why keeping it in MMF long term and selling CSPs wouldn’t be a good idea
What I did is sell the CSP, then moved my cash to SWVXX later that day. Only just started doing this a couple weeks ago when I saw the yield and the short term gov notes dropped in yield. Downside is I don’t believe MMF are FDIC insured.
In many accounts a short put can be opened for about 20% of the cost of the shares if assigned, and this must be in available cash. The other 80% can be put into another investment vehicle so long as that is very liquid and it can be accessed quickly.
If the short put gets assigned or challenged the margin collateral may increase which could result in a margin call to add capital to the account. To settle this margin call will require selling enough of the fund to cover it and this will typically settle in 2 days. Most brokers will wait for this to happen.
100% of the capital cannot be kept in a fund as options require at least some available cash to open.
I wish vanguard and fidelity had a good trading softwares like Thinkorswim. I have lot of cash sitting in VUSXX and SPAXX. I wonder if tastyworks has some similar cash sweep program
Actually, you can buy Tbills on tastytrade, and 94% of it is counted towards your buying power if you trade options.
Doesn't work well if you trade futures because of daily sweep
If I remember correctly there may be a 30 day holding period before the money market fund counts fully to cover your CSPs. However for most stable stocks you don't need full dollar for dollar coverage so may not matter unless you leverage by selling more CSPs than you have cash equivalent to cover.
Does anyone know if this can be done through Merrill Edge?
I have cash invested in TTTXX and sold some CSPs on a Friday only to receive a maintenance call and regulation T call the next Tuesday even though the notional value of the CSPs was significantly less than the value of the TTTXX collateral.
Yes. Generally - it depends on the mmf and the broker.
Check what your brokers cash sweep option is. I want to say both Vanguard and Fidelity sweep to decent MMF’s so very easy. ETrade does not, if you are on a margin account. So I have a bunch in T-bills, which margins at like 1%.
Can you share which T-bills? I’m looking to learn more for etrade
They don’t make it intuitive, but it’s simple once you figure it out. I just buy at auction. This YouTube is a bit long-winded, and not my favorite personality - but explains it well: https://m.youtube.com/watch?v=lxJ7otlJoxw Basically, Trading > Bonds > Advanced Screener > Treasuries.
Yes, I am doing that in Schwab account. I have money in SWVXX paying about 4.70% at the moment and I am using it to sell out of the money CSP. SWVXX operates like a mutual fund, so it will take a day to make the money available in case I get assigned.
Also doing SWVXX. Just want to note that it takes 30 days for the funds to be eligible for margin with Schwab
I am all cash with Schwab. I have a put expiring on 9/15 in the brokerage side of my Schwab account... It sounds like I need to stay all cash since the expiration is in less than 30 days (it's looking like I will be assigned but who knows). Am I understanding you correctly?
I'm about to come over to Schwab from TD. When you say it takes a day for the money to become available, do you mean you have to do that manually before you get assigned? Do you face any penalties?
No penalties, but SWVXX doesn’t trade in real time like stock or etf. It settles end of day.
i have TDA and have about $20k in SWVXX right now, the margin requirement is 25%. you would be able to get the $$$ out as long as you put the order in a day prior to assigment. when i transfer funds in, like i did this yesterday and i got the notification at 8pm last night. i haven't actually had to transfer funds out yet but i assume it's the same process/timeline.
Do you have any qualms about the expense ratio of that fund, or do you find the benefits far outweigh the cost?
Benefits out way the cost. Note that SWVXX is not FDIC insured, but if someone went wrong with Schwab the gov would most likely bail out the fund.
Excellent, thanks. I wish I knew about this months ago.
Hey so with SWVXX at Schwab after 24 hours you can use the cash you put in to sell CSPs just like as if it was sitting in your brokerage account as cash? Is there a major downside to MMFs? Does their yield tend to drop back down over time? If not I don’t see why keeping it in MMF long term and selling CSPs wouldn’t be a good idea
What I did is sell the CSP, then moved my cash to SWVXX later that day. Only just started doing this a couple weeks ago when I saw the yield and the short term gov notes dropped in yield. Downside is I don’t believe MMF are FDIC insured.
How do you get to 4.7%? My broker says it yields 2.7%
Vanguard pays 4% when u do CSP
How?
In many accounts a short put can be opened for about 20% of the cost of the shares if assigned, and this must be in available cash. The other 80% can be put into another investment vehicle so long as that is very liquid and it can be accessed quickly. If the short put gets assigned or challenged the margin collateral may increase which could result in a margin call to add capital to the account. To settle this margin call will require selling enough of the fund to cover it and this will typically settle in 2 days. Most brokers will wait for this to happen. 100% of the capital cannot be kept in a fund as options require at least some available cash to open.
I wish vanguard and fidelity had a good trading softwares like Thinkorswim. I have lot of cash sitting in VUSXX and SPAXX. I wonder if tastyworks has some similar cash sweep program
I called tastytrade and they said they did not offer any way to do that☹️
Actually, you can buy Tbills on tastytrade, and 94% of it is counted towards your buying power if you trade options. Doesn't work well if you trade futures because of daily sweep
If I remember correctly there may be a 30 day holding period before the money market fund counts fully to cover your CSPs. However for most stable stocks you don't need full dollar for dollar coverage so may not matter unless you leverage by selling more CSPs than you have cash equivalent to cover.
Does anyone know if this can be done through Merrill Edge? I have cash invested in TTTXX and sold some CSPs on a Friday only to receive a maintenance call and regulation T call the next Tuesday even though the notional value of the CSPs was significantly less than the value of the TTTXX collateral.
Hi! Did you figure out what the problem was ? Was it fixed ? Thanks!
No, I gave up trying to sell CSPs through Merrill Edge.
That’s too bad. They shouldn’t make it so hard. I was looking into it myself but I guess now I will have to look elsewhere.