Fri, Aug 29, 2014, 10:19 PM EDT - U.S. Markets closed


% | $
Quotes you view appear here for quick access.

Intel Corporation Message Board

you are viewing a single comment's thread.

view the rest of the posts
  • fizrwinnr11 fizrwinnr11 Jun 18, 2011 4:00 PM Flag

    10-strike INTC naked puts expiring in Jan 2013

    MARGIN REQUIREMENTS are critical when it comes to what the returns will be on naked put investments. Most houses use the same formula for determining requirements but then they also have minimum requirements as well. With Ameritrade, they strictly follow the formula and do NOT impose minimums.

    At Fidelity for example, the minimum requirement per contract is 15% of the market value of the stock plus the ask price of the option.

    So for them, even if you are looking to sell a low strike like the 10's, their minimum requirement would be 15$ of $2,119 ($318) plus the $34 asked which is $352 per contract. So if an investor sells at the $31 bid and receives $30 per contract after commissions, the return would be 8.5% for 19 months or 5.4% annualized. That's not very exciting at all.

    But at my brokerage, they only require 10% of the strike plus the asked price of the option. So in the case of 10-strike naked puts, the requirements are just $100 plus $34 or $134. And $30 net premiums after commissions on just a $134 requirement is 22.4% over the 19 months or 14.0% annualized versus just 8.5% for 19 months at Fidelity or 5.4% annualized.

    14.0% with this kind of safety is outstanding whereas 5.4% annualized at the other house is no great shakes.

    The 10% of the strike price portion of the requirement holds as long as the stock continues to close at 111.25% or more of the strike. If the stock falls below that, requirements increase.

34.92+0.27(+0.78%)Aug 29 3:59 PMEDT

Trending Tickers

Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.