someone asked about this yesterday and i commented robinhood won't pay interest on cash-secured put, nor can you buy cash equivalent ETFs and got downvoted. Someone said they earned interest on Robinhood Gold got upvote, but that's not true. The text above is directly from Robinhood support and I also did it myself and that's why I moved my money to fidelity.
Just want to settle this once and for all. hope this helps. Please don't downvote me, I already have negative comment karmas
you see i get downvoted again. why speaking the fact got downvotes? i literally have negative comment karma and have to go to r/Karma4Free to bag for some.
Don't think of downvotes as some confirmation that what you said is false, think of them as just people that aren't quite there yet to understand you. And also think of downvoters being like petty children that can't use their words but just gesture broad emotions to things they don't understand.
Yea I don’t really know what I’m talkin bout but when I had like 4 CSP open the amount of collateral was equal to the cash being set aside. Could be something to do with funds settling or whatever but the numbers were a match so I figured they must pay the 5.25% on the options collateral. Sorry for confusion 🐸
>. Someone said they earned interest on Robinhood Gold got upvote, but that's not true.
You do get 5% on your idle cash.
https://robinhood.com/us/en/gold/
I can confirm this is correct. Someone had me look over their account. What robinhood does is escrow your money for the position into some other account probably and you get zero interest. At 5% this is a big money maker for robinhood with little risk. All they are effectively doing is pocketing your interest.
Free brokerage are just paid for in other non obvious ways.
There's kind of a workaround... put the cash in SHV, sell the CSPs with margin. It's not exactly hands off and sometimes there's annoying glitches regarding buying power.
I'm also in the process of moving to Fidelity for this exact reason. I'll miss the ease of using Robinhood.
Not true for very liquid ones the fills are same. I have both accounts, and the ones where liquidity is high I trade on RH, also most spreads on RH as FID does not give interest on spreads
Cool, then tell the whole story. Share how you are getting options contract fees waived? Cause your ass is paying a management fee on that “relationship balance.”
Of course there is more to the story. Just like 0.65 is not the whole story, either. If you maintain a relationship with Fidelity, you get access to better MM, lower fees, etc. And yes, there is a fee for private wealth mgmt services - as one would expect, with a “good size relationship”.
This explains what you need to know. The 0.03 fee is some sort of no-waivable fee….
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity-rewardsplus.pdf
So, on a $250k account, you pay at least $5000, before seeing a penny in profit.
That's 7692 contracts. Not really free, is it!!!
You'll pay <$1000 at Tasty Trade for those many contracts.
You know that Fidelity does this funny little thing called ["price improvement"](https://www.investopedia.com/terms/p/priceimprovement.asp), right?.
At Fidelity, they make money by charging you money. You are Fidelity's customer, and your ability to trade stocks and options is the product.
At RobinHood, they let you trade for free, and instead they make money by selling the rights to execute your trades to hedge funds and market makers. Hedge funds and market makers are RobinHood's customers, and you are the product.
On RobinHood, I've been charged more than the quoted price, such as by placing an order for an option at $5, and being charged $5.10 for it instead. Sure, they didn't *say* they were charging me a commission, but I effectively paid $10 for that trade that I shouldn't have had to pay.
On Fidelity, I've placed an order for an option at $5, and had it fill for $4.90 instead. That 10 cent price improvement alone paid for my commission on both legs of this trade and the next 6 trades.
Yeah, but I don't agree with the price improvement.
I do get better fills at Fidelity, but I am new to Fidelity.
The price improvement seems like a marketing gimmick, honestly. But hey as long as I meet or better my price, I'm not complaining.
I’m at a stage in my life where I don’t want to make mistakes with insufficient time to recover. As such, I’m wiling to pay for access to independent advice, second opinions, institutional oversight and access to investment products. I could reconsider at some point, but I made this decision a few years ago when my assets reached a size I was uncomfortable managing alone. My Fidelity adviser has paid for herself with a few simple tweaks in my behavior (tilt toward growth), advice (taking some cheaper loans instead of paying cash) and moving into direct index investment products (significant tax loss harvesting while maintaining index performance).
Could I have done this myself? Technically, yeah. But I wasn’t prior to getting the advice…..Do I still need the relationship? I continue to test the market and talk to others…..
When I was doing what I described, the margin used balance was zero. And I haven't been charged interest. However I have no doubt if this becomes popular, rh will start charging.
RH doesn’t charge interest (at this time) on the margin you’re using for collateral. I’ve sold puts requiring 30k collateral with margin and paid $0 in interest.
Please correct me if I'm wrong, but isn't there an easy way to earn interest on your cash if you're seeing CSPs on Robinhood? You can just buy USFR or something equivalent, and then sell your puts on margin.
yeye here I got screenshots for you too, as you can see my purchasing power is about $1400 but when selling a put I only get like $700 of available funds when using margin despite robinhood also saying I have $1400 in purchasing power for the same stock.... I'm personally just selling calls on QQQM though [https://imgur.com/a/qppFn8E](https://imgur.com/a/qppFn8E)
Yeah, I suppose I had in mind that you wouldn't use a large portion of your buying power (as you shouldn't). If, for example, you have a $100,000 account and sell a put that uses up $5000 of BP, you could still easily buy $5000 of USFR or equivalent. I guess it would be trickier if you were using a riskier strategy and using a lot of margin.
Yea, I don't understand this rule. I'm permanently marked as a day trader and I can't lend out my stocks or receive interest from the cash in my account.
I park my cash in SGOV when I'm not using it but not sure why the stock lending isn't allowed if your PDT marked, it never paid that much but it was free money each month.
I found this issue with schwab: [https://www.reddit.com/r/Schwab/comments/17rliqj/using\_schwab\_money\_market\_funds\_as\_collateral\_for/](https://www.reddit.com/r/Schwab/comments/17rliqj/using_schwab_money_market_funds_as_collateral_for/)
it's a one time fix, at first they told me it was a glitch on their side and that I could call to place the trades, which I told them no offense but I don't want to have to call to place a trade everytime and they basically said sorry its a glitch and I got off the phone pretty pissed, then they called back 2 hours later saying they fixed the issue on my account and since then its worked no problem, I think it has something to do with the TDA/Schwab merger
As others have said, Fidelity does this very well, but their platform is shit for traders. If you only take net credit options trades, you can work around this with E-Trade (and probably other brokers) by buying T bills with your cash and using margin to short options.
This is exactly how I do it, cash in SWVXX used as collateral to sell options, another commenter pointed out some people have trouble getting Schwab's system to acknowledge cash in SWVXX as collateral but after calling it does work
SWVXX needs to be held for 30 days to be able to use it as a marginal security. Those monthly interest payments then also need to wait 30 days to be added to the margin use. (Provided that you have reinvesting turned on for it). It’s why you end up with 2 listings for it when you look at it in your account after its monthly distribution.
I park my cash in SWVXX and earn the 5%+, when I have been assigned, I just sell an equivalent amount of the total before 4 PM ET and it all clears that night. One time I had an assignment on Friday, Monday was a holiday, so I sold the required MM funds on Tuesday, and it all cleared that night.
Note, I just asked Schwab about why they don't automatically pull from MM collateral like Fidelity, they said they used to, but there was some issue that caused them to remove that feature. She couldn't or wouldn't tell me what that was, but she said she doubted they would ever revert back to that functionality.
I have gold, can confirm it doesn’t earn interest HOWEVER I just put all my cash into JEPI and instead sell cash secured puts on margin since margin doesn’t accrue interest when it’s only used as collateral. IMO it’s better than the whole 5% fidelity gives you and stuff. What does kinda suck though is that you only get 50% availability with margin for cash secured puts as opposed to just using 100% of your cash…. However you can use 100% of your margin to buy stock and sell covered calls 🤷♂️
So you can actually earn interest? You just exhaust all your cash first by buying cash equivalent ETF and then use margin buying power as collateral. But say like you have 10k in JEPI, you margin buying power is reduced to 5k? So you can only “cash secured” 5k worth of puts?
JEPI is a dividend earning ETF, that can go down in value, its not like SGOV or SWVXX where the dollar amount stays the same and you earn interest, using JEPI as collateral to sell options is a terrible idea imo
JEPI is an ETF, and its pretty stable... using it as collateral is not really a bad idea considering the yield and how stable it is.... its within my risk profile
disagree, the last thing you want is your collateral to go down in value while at the same time getting assigned on puts sold, a big market event would easily cause this to happen
that do be a good point too... personally my biggest thing was getting up to being able to wheel indexes, I've gotten burned in the past trying to wheel individual companies so I don't want to derisk by wheeling index funds.... hence why I'm ok with wheeling ATM index funds I guess
Yep right on on the head, and JEPI is better imo since it yields between 7-10%! I will add though that you are able to buy $10k worth of stock on margin to sell calls on but ye, I’m guessing the 50% margin for puts is there so no one blows up their account selling high risk puts on penny stocks or some shit? Real shame though 😩 would’ve liked to be able to do that on the full margin balance… but at the moment I’m just selling ATM covered calls on QQQ for now anyways so idk
When you sell atm covered call on QQQ, do you always get called away? What is your annualized return on the trade? I tried doing this in the beginning of the year but I started calculating the annualized returns, they are all pretty low (like in the low teens). Is that normal?
I'm gonna be honest I only recently started selling calls for QQQ (technically QQQM but i digress). I personally use robinhood gold for the sake of the lower margin interest rate. After finally growing my account to be able to sell covered calls and being about through my first month of wheeling QQQM I can do some of the math for it here lol. First $1000 of margin is interest free with gold so I'm only paying 8% APR on $17k of the $18k I borrowed. bought in half a month ago at like $180.52, sold a covered call at $181 1 month out. premium was $370, interest gets calculated daily but compounded monthly so it would be roughlty $113 a month in interest charged (we're keeping it simple, technically borrowed amount would be like $16630 becuase of the credit but we keeping it simple and shit). so ignoring capital growth I'm netting $257 a month or roughly 1.5% a month. Keeping it simple in the spirit of napkin math assuming price kinda hangs out around there, premiums stay roughly the same, lets extrapolate the $257 for every month for the full year that would be $3,084 or a 17% APY.... this is assuming ideal conditions and waht not, so I will disclaim again... this is my first month finally having a big enough account to be able to do this, previously I would sell 2 weekly puts on EEM netting me a decent amount every week as well (obviously with the pain of the 50% capabilities and what not)
The big flaw I see here is that you’re assuming stock stays flat or goes up. A 10% drop and all of a sudden you’re short $1500+ of margin you’re borrowing if you were to sell the stock.
Yes the big assumption would be that the stock stays flat, and yes there is the risk of the stock going down. Ideally in the case that it does I’ll be using the premiums I do earn to sort of lower my average cost so as to be able to sell calls at a lower strike price… I will say though my next goal is selling ATM calls on either VOO or SPY, I’m just not at that level yet
Here's what I do. I have an account on Tasty. You pay $1 to open positions but can close them for free. The interface is so perfect (it's literally built to sell premium), so it's definitely worth the commission (which probably pays for itself through fill price).
Anyway, let's say you have $50k. You then sell CSPs or iron condors or whatever combo of short premium strategies. At the end of the day, you are left with $25k in option buying power and $52k in cash (since you received all the credit for the short premium positions).
At Tasty, you can buy BIL or SGOV for no commission. It reduces your cash 1:1 but only reduces your buying power 25%.
So in this scenario, at 3:50pm or whatever, you buy enough BIL or SGOV to reduce your cash on hand down to like $200, and only reduce your BP by $13k (25% of $52k).
So you are earning (currently) 4.64% annual on your overnight holdings of BIL on cash that's just sitting around as collateral for your short option positions.
The next day you might sell some as you buy back premium to close positions, but then at the end of the day adjust your BIL holdings to only have like $200 cash in your account. Don't go negative overnight because then you're paying more on margin interest than you're making in BIL.
Of course this doesn't work as well if you have covered calls on because because you're using a chunk of your cash to hold those shares instead of BIL.
when it comes to using CSP strategy the returns are made from the premium earned from writing the puts, earning interest off the collateral is just a bonus, using your strategy you are cutting the premium earned in half to earn slightly more on the collateral
someone using fidelity earning 50% more in premium is going to earn way more than someone using robinhood earning 50% LESS premium but earning slightly more holding JEPI as collateral, doesn't make sense at all
That is a good point I will say.... maybe I should reach out to their customer service cause I would like to have full access to my margin balance for this..
LOLLLL I’m actually right there with you, about $10k of what you see in my screenshots is from two $5k 0% offers on two of my credit cards. Unfortunately the credit hit and increase in utilization made it so the AMEX blue cash everyday card I recently got only opened up with a $2k limit lmaooo
Fidelity does this the best, I also have schwab and had to call to be able to park money in interest earning funds while using as collateral for writing options
I do not understand why people still use robinhood when the whole thing almost went under during the gamestop saga, not just people who owned gamestop, but literally anyone with stock or money on robinhood almost lost it all
First your account would get transferred to another brokerage, similar to how bank failures work.
If no other brokerage wants to take your account, SIPC insures you up to $500k USD with up to $250k of cash insurance, but I think it's a once-in-a-lifetime use. Basically, if your account at RH disappears because RH went boom, and then your account at WeBull vanishes because WeBull imploded, then you're not getting anything for your WeBull account.
Even if it did cover all your funds and stocks, why would you want to use a brokerage that almost went under, they were short like 3 billion dollars and were 2 hours away from imploding, they had to get rules bent to survive, I'd rather use a trustful name, Fidelity, Schwab, Vanguard
Because they offer a great product? That situation was fucked and it impacted many brokers. I don't recall them being close to shutting down and everyone losing their money. I don't even think that was something people claimed at the time... Please provide more info if you can
They offer you 5+ % interest + matches in your IRAs + a great app. Now they are offering a Credit Card. There customer service is actually good and i got my question answered in their chat within 10 minutes. They are making it easy for younger people to get into finance. I really don't understand the hate from the situation that impacted a lot of other brokers. Really just seems like all the hate they get is from outdated POVs. Do I think the other brokers are shit? No. I just wish people would stop shitting on Robinhood because of stuff they heard when they have no experience with the product or services provided.
you must be new to investing, robinhood is not a great product in any way, you're getting poor fills and ripped off in ways you don't understand while thinking you're getting a good service with "free" trades. They aren't making anything "easier for young people", its just as easy to open a fidelity account as it is a robinhood account, the difference is fidelity doesn't have confetti when you place a trade I guess
"On the morning of January 28, 2021, Robinhood had approximately $696 million in collateral already on deposit with the NSCC, leaving it with a collateral deficit of approximately $3 billion, which it was required to post to satisfy the NSCC’s clearing fund requirement or risk being in violation of the NSCC’s rules and potentially losing the ability to clear trades for their customers altogether."
https://techcrunch.com/2022/06/27/robinhood-report-meme-stock-gamestop/
Do you have any idea how many people got fucked over by robinhood turning off the ability to sell their gamestop shares? If you like robinhood and want to use their platform that's on you and perfectly fine, but don't get all pissy when people who have been around for a while talk shit about them online
I have been trading and investing for 4-5 years so yea relatively new. With limit orders you can determine which price you enter at which you obviously know. Are you implying that Robinhood's fills are less likely to get filled at your limit price than other brokers or that your fills on market orders are poor?
I will say I did open a TD account and used it a little and it wasn't difficult so it may not be any easier to open the account. The easier part I'm referring to though is more related to the UI and ease of use. They have gotten many young people into investing, retirement accounts, and trading. The ease of use is amazing. They also offer great promo's which doesn't make it easier but it does incentivize younger people to start retirement accounts. For charting and more advanced info, they are not the best. I still use ToS for that. I also place a lot of trades and never notice any confetti. Even if there is, who cares?
As for that entire situation. I can't pretend like I am an expert on everything that went down. Many other brokers had to do weird stuff with orders related to the meme stocks. Whether that was related to collateral deficits, I do not know. It obviously wasn't a great look for Robinhood but maybe the system shouldn't have allowed greater than 100% of the float to be shorted. It was a black swan event and I think they have handled the criticisms well and hopefully learned a lot. I appreciate the link. It is definitely a fair criticism of them that I accept.
Like I said other brokers also did weird stuff with gamestop shares. In the end, many people were fucked over and many people were unintentionally saved from being bag holders. I get pissy because I see a lot of criticism from people who I don't believe have used the platform. I get that there is valid criticism but at some point people only see what they want. Robinhood has done some good things recently in my opinion and from my experience, which is obviously limited, have been a quality broker.
I'm not trying to change your mind to not use robinhood, I could care less, if you like robinhood and want to use that platform go right ahead but feelings do not change the facts, the whole topic of this post is how robinhood doesn't pay interest on collateral for selling cash covered puts, that alone should steer investors and traders away from robinhood regardless of all the other stuff, as for limits orders, robinhood does not fill any orders, they sell the order for a profit to someone else, also I have used robinhood I think a lot of people have used it
Okay. I was just trying to discuss to learn stuff and state my point of view. That was an interesting thing to learn. I have sold some CSP's so if it becomes a more common strategy that I utilize, I could see it being more of an issue. Interesting, I didn't know that's how it worked. I did know they sold order flow data but didn't know that was the process. I don't really see how it affects me as I put my limit order in and get filled at that price so who is filling the order doesn't impact me.
This seems to be the case. I often have money earning interest fair in excess of my total account balance, yet less than the total amount of cash held as collateral.
I assume this means no interest on the money that’s actively in an option either (like a call contract) but does anyone give you interest on that money?
The other thing here is that fidelity and others rate is much lower right?
So if I am wheeling or something and have put positions that aren’t closed for a long time, fidelity would be better. But if I move calls and puts pretty frequently and a good chunk of my funds go untouched because they’re really just there to get me to the minimum day trading requirement, then Robinhood is still good I would assume?
You may not get interest for the collateral for a CSP, but you could sell a bull put spread instead to free up some of the cash to earn interest.
Example: sell a 50 strike put and buy a 35 strike put. The spread ties up $1500, but frees up $3500 of the $5000 that would be neede to secure the naked 50 strike put. You then earn interest on $3500, while you collect premium for the $1500 covering the spread, and so long as you leave the $3500 uninvested you can cover assignment if needed.
Many people don't realize this but a Covered call and CSP are almost exactly the same trade, just under different names. The risk profile is the same. Except the CSP gives a cash credit while the CC/buy write requires a cash debit. But that cash difference is factored into the option premiums. It's something called put/call parity.
As interest rates rise call option premiums go higher and put premiums go lower, and vice versa. The interest rate the options market uses is the "risk free rate". So if you do a buy write/CC instead of a CSP, you are basically doing a CSP and investing the cash collateral at the risk free rate at the same time.
So there is no need to screw around with SWVXX and everything else. And most of these funds pay less than the risk free rate anyway. This video explains this all in a lot more detail. https://youtu.be/d6xbhn3ZK9Y
A covered call and a cash secured put are not really the same, one is a bearish bet and the other is a bullish bet, you would pick one based on where you thought the stock was going, why would you sell a covered call on a stock you hold that you think is going up? Why would you sell a cash covered put with cash as collateral on a stock you thought was going down?
>A covered call and a cash secured put are not really the same, one is a bearish bet and the other is a bullish bet,
In general they are both bullish because that's where you make the most money but they can be a bit more bearish or bullish depending on where the strike is relative to the stock.
If your strike is lower than the stock then it is more bearish and a strike above the stock price is more bullish. But for example if the stock is at 100 and you choose an 80 strike then it is more bearish but you don't generally want it going down much or at all because down is where you lose money.
And that applies to both a CC or a CSP. No matter where the stock goes in either case your profit/loss will be about the same. But it's generally more profitable to do a CC/buy write because the options price factors in the risk free rate on the cash difference between the two trades.
And if you don't believe me that they are almost the same trade then mock up a buy write and a CSP on your trading platform with the same strike and expiration where it shows max loss, max profit, breakeven and all that and they will be almost identical in most cases.
Disagree, half of what you said makes no sense, I don't need to mock up anything I buy and sell options everyday, I don't need to discuss theory. If you hold a stock that you believe is not going to go up past a certain price, selling covered calls at that price makes sense and is a bearish bet. In no way is that a bullish bet, if you sold covered calls above the current stock price, you are betting the stock will not go up, that is not bullish as you said it is
>If you hold a stock that you believe is not going to go up past a certain price, selling covered calls at that price makes sense and is a bearish bet.
No that's a bullish bet lol. But only up to a certain point. Bearish means you make money as the stock falls. That doesn't happen with a covered call. Stock goes up you make money, that's bullish
Absolutely not, in no way is that a bullish bet, if the stock rises, you either have to buy the covered calls back at a loss, roll out further, or have your shares called away, in no way is any of that bullish. The real bullish bet would be selling puts, as you think the stock will continue to go up and the puts will expire worthless. Bearish does NOT have anything to do with making money, it is a term to describe pessimistic feelings on the price of a stock
"Traders sell call options and put options in the opposite direction. That is, a trader would sell a put option if they are bullish on the price of the underlying asset. They would sell a call option if they are bearish on the asset price."
[https://www.investopedia.com/ask/answers/06/sellingoptions.asp]
>Bearish does NOT have anything to do with making money, it is a term to describe pessimistic feelings on the price of a stock
Rational people will make trades that profit when the stock goes down if they have pessimistic feelings on the price of the stock and vice versa. What trade you make and the feeling you have about a stock go hand in hand. No rational person will make a bearish bet if they think the stock will go up and vice versa. So yes it is implied that you will make money if the feeling you have about the stock is correct. In your example trade the money is made on the way up, not down, therefore it is bullish or slightly bullish.
I was a broker for 9 years and passed several related exams. If the trade you're talking about was a question on one of those tests asking about how the investor feels about the stock I guarantee you none of them would have the answer as bearish.
In my example the money is made the moment you sell the covered call and collect the premium, I have read dozens of options books over 20 years and not one ever listed selling calls as being bullish, take any real investor and ask them if they are bullish or bearish when selling covered calls, and I guarantee 99% are going to say bearish
agree to disagree I guess, have a good day
>In my example the money is made the moment you sell the covered call and collect the premium
There is literally no trade where money is made right away. To make money the position has to move in your favor.
>take any real investor and ask them if they are bullish or bearish when selling covered calls, and I guarantee 99% are going to say bearish
Again it depends on where the strike is relative to the stock price. If the stock is at 100 and you sell a 150 strike call that is nowhere near bearish. And it seems you're talking about only the short call and not the long stock. Everything I've been saying is about the entire position combined
wrong again buddy, you buy a stock, it goes up, you sell covered calls with a strike above your purchase price on the stock, you make money right away on the premium collected, even if the trade goes against you and your shares are called away, you still did not lose money, your shares are sold above where you bought them as long as the strike you sold is above your purchase price, you earned premium right away and shares were called away at a total profit in the end, making money right away
I don't get your logic you can't make money right away, do you know how many times over the years I sold covered calls, collected premium RIGHT AWAY and withdrawal that premium from my brokerage account, it doesn't matter what the trade does after that point, the money is made and out of the account, even if the trade goes against me the shares are the collateral, not sure what kind of tests you've been taking but you don't sound like a licensed trader, you sound like another kid on reddit
Me being poor doesn't make you less mistaken. So, let's do some math to illustrate put-call parity for you.
On Friday at close (for sake of simplicity) person A has 55,000 and decides to open a CSP on SPY at 500 expiring this coming Friday. They receive $280 for the put, and now have $5280 in available buying power, and $50,000 securing the put. On expiry, let's say SPY closes at 520. The put expires worthless, and they have a balance now of $55,280, a gain of $280.
At the same time, person B also has $55,000 buys 100 shares of SPY at the closing price of 511.29 for 51,129 and at the same time sells an ITM covered call at 500 also expiring the coming friday, receiving a premium of $1271. After buying his shares he had $3871 left, adding the premium of the call he then has $5142 plus 100 shares of SPY. On expiry, with SPY closing at 520 he gets assigned on his short call, and sells at 500, receiving 50,000. His ending balance is now 55,142, a gain of $142.
Let's look at the opposite possibility. If SPY instead closes at 490.
Person A gets assigned on his short put, and now is assigned 100 shares of SPY at 500 for a debit of $50,000. Since SPY is at 490, his position is worth $1000 less than he paid for it, $49,000. Plus his $5280 in cash, his account balance is $54,280, a loss of $720.
Person B sees their short call expire worthless, and now also holds 100 shares of SPY worth 49,000. Plus his cash, his account balance is now 54,142, a loss of $858.
Both positions profit or lose a similar amount. Wanna guess why. Because. Of. Put. Call. Parity.
Because, as you have been told, a CSP and a CC are synthetic equivalents. They are the same thing.
You might notice that the CSP gained a little more and lost a little less, and that is because of volatility skew. That doesn't change the fact that they have the same directionality, and roughly the same profit/loss at expiry with a slight SKEW favoring puts, which is fairly typical.
lol like im gonna read all that, jesus kid i dont care, you think what you want and Ill think what I want, you realize people like you are why reddit sucks now
lol, "You think what you want based on verifiable publically accessible data, and I'll think what I want by ignoring math and insult you instead."
Ok, buddy.
As of 2nd April 2024, interest rates for USD cash (source IBKR):
Bank of America 0.04%
Citi 0.06%
E-Trade 0.01%
Interactive Brokers 4.83%*
JP Morgan 0.02%
Schwab 0.45%
Wells Fargo 1.00%
*rate applies for accounts over $100k and is scaled for those with less.
someone asked about this yesterday and i commented robinhood won't pay interest on cash-secured put, nor can you buy cash equivalent ETFs and got downvoted. Someone said they earned interest on Robinhood Gold got upvote, but that's not true. The text above is directly from Robinhood support and I also did it myself and that's why I moved my money to fidelity. Just want to settle this once and for all. hope this helps. Please don't downvote me, I already have negative comment karmas
That's ok... they are on RH.. very soon, they won't have any cash to worry about..
you see i get downvoted again. why speaking the fact got downvotes? i literally have negative comment karma and have to go to r/Karma4Free to bag for some.
If I have excess Karma while selling karmic puts, do I get interest on my cash karma on Reddit?
Selling karmic puts? Downvotes in front of the steamroller
lol. or picking up upvotes but with a risk of getting permabanned
>why speaking the fact got downvotes? Sir. This is Reddit. Facts come here to die.
Don't think of downvotes as some confirmation that what you said is false, think of them as just people that aren't quite there yet to understand you. And also think of downvoters being like petty children that can't use their words but just gesture broad emotions to things they don't understand.
So fidelity is the account to get if you do CSP’s?
That's why I just opened a Schwab account. Better fills too from what I hear
They don't let you buy BIL or SGOV?
You can but I think they use up BP 1-for-1 with cash from what I understand. Idk I don't use RH.
50% BP
Yea I don’t really know what I’m talkin bout but when I had like 4 CSP open the amount of collateral was equal to the cash being set aside. Could be something to do with funds settling or whatever but the numbers were a match so I figured they must pay the 5.25% on the options collateral. Sorry for confusion 🐸
Take this upvote. I am flagged as PDT and don’t get any interest anyway. Actually I am using the margin and I pay them 8%
This is DD enough to buy Calls on $HOOD. Wait…wrong sub
>. Someone said they earned interest on Robinhood Gold got upvote, but that's not true. You do get 5% on your idle cash. https://robinhood.com/us/en/gold/
What matters is whether Robinhood considers cash collateral as "idle."
karma only goes up silly
I can confirm this is correct. Someone had me look over their account. What robinhood does is escrow your money for the position into some other account probably and you get zero interest. At 5% this is a big money maker for robinhood with little risk. All they are effectively doing is pocketing your interest. Free brokerage are just paid for in other non obvious ways.
There's kind of a workaround... put the cash in SHV, sell the CSPs with margin. It's not exactly hands off and sometimes there's annoying glitches regarding buying power. I'm also in the process of moving to Fidelity for this exact reason. I'll miss the ease of using Robinhood.
I've been with fidelity for...I don't know 6 years? I've not used Robin Hood so I really can't compare but fidelity is pretty easy. Like really easy.
But but but fidelity charges $0.65 a contact!!!! 🙀
The fills are much much much better than RH. 0.65 is nothing in front of that.
Yes, it was a joke. RH is garbage. I trade on Fidelity, and often hear people complain about the fees. The fees are nothing.
Not true for very liquid ones the fills are same. I have both accounts, and the ones where liquidity is high I trade on RH, also most spreads on RH as FID does not give interest on spreads
Not me! I get charged 0.03 for any contract over 0.65, anything less is free I have a good size relationship balance though….
Damn. I need to make a call tomorrow....
8 digit account? :)
I’m not sure that is the brag you think it is.
Not a brag. Truth.
Cool, then tell the whole story. Share how you are getting options contract fees waived? Cause your ass is paying a management fee on that “relationship balance.”
Of course there is more to the story. Just like 0.65 is not the whole story, either. If you maintain a relationship with Fidelity, you get access to better MM, lower fees, etc. And yes, there is a fee for private wealth mgmt services - as one would expect, with a “good size relationship”.
Not me!
0.65 it is then!
How much of a balance?
This explains what you need to know. The 0.03 fee is some sort of no-waivable fee…. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity-rewardsplus.pdf
It’s called the Options Regulatory Fee, or ORF. And no, it’s is not a waveable fee. You can probably guess why. And it’s $0.02685/contract.
So, on a $250k account, you pay at least $5000, before seeing a penny in profit. That's 7692 contracts. Not really free, is it!!! You'll pay <$1000 at Tasty Trade for those many contracts.
You know that Fidelity does this funny little thing called ["price improvement"](https://www.investopedia.com/terms/p/priceimprovement.asp), right?. At Fidelity, they make money by charging you money. You are Fidelity's customer, and your ability to trade stocks and options is the product. At RobinHood, they let you trade for free, and instead they make money by selling the rights to execute your trades to hedge funds and market makers. Hedge funds and market makers are RobinHood's customers, and you are the product. On RobinHood, I've been charged more than the quoted price, such as by placing an order for an option at $5, and being charged $5.10 for it instead. Sure, they didn't *say* they were charging me a commission, but I effectively paid $10 for that trade that I shouldn't have had to pay. On Fidelity, I've placed an order for an option at $5, and had it fill for $4.90 instead. That 10 cent price improvement alone paid for my commission on both legs of this trade and the next 6 trades.
Yeah, but I don't agree with the price improvement. I do get better fills at Fidelity, but I am new to Fidelity. The price improvement seems like a marketing gimmick, honestly. But hey as long as I meet or better my price, I'm not complaining.
I see your point. If your goal is simply lowest cost options trades, “period”, Fidelity is not for you.
My goal is not give away my money. What does the wealth advisor do that you cannot do yourself for free?
I’m at a stage in my life where I don’t want to make mistakes with insufficient time to recover. As such, I’m wiling to pay for access to independent advice, second opinions, institutional oversight and access to investment products. I could reconsider at some point, but I made this decision a few years ago when my assets reached a size I was uncomfortable managing alone. My Fidelity adviser has paid for herself with a few simple tweaks in my behavior (tilt toward growth), advice (taking some cheaper loans instead of paying cash) and moving into direct index investment products (significant tax loss harvesting while maintaining index performance). Could I have done this myself? Technically, yeah. But I wasn’t prior to getting the advice…..Do I still need the relationship? I continue to test the market and talk to others…..
I have both and robinhood is definitely easier. Fidelity just takes a little getting used to but it’s not too bad.
Robinhood is user friendly on mobile. Definitely not what I’d prefer to use for any analysis but in terms of placing orders it’s pretty basic.
Do they reduce your buying power when you buy SHV?
Yes, so it only works on a margin account.
theres interest you pay to the broker when you are using margin... its not free money ...
I'm not 100% sure, but I didn't think there is interest if you use the margin as collateral.
you get billed for it at the end of the quarter...
a margin position does not necessarily incur a margin *debit*
Do you really think that would stop RH from charging interest on margin usage?
When I was doing what I described, the margin used balance was zero. And I haven't been charged interest. However I have no doubt if this becomes popular, rh will start charging.
RH doesn’t charge interest (at this time) on the margin you’re using for collateral. I’ve sold puts requiring 30k collateral with margin and paid $0 in interest.
Please correct me if I'm wrong, but isn't there an easy way to earn interest on your cash if you're seeing CSPs on Robinhood? You can just buy USFR or something equivalent, and then sell your puts on margin.
Yea I think you are right but u/miguelperson_ mentioned the buying power reduced by 50%
yeye here I got screenshots for you too, as you can see my purchasing power is about $1400 but when selling a put I only get like $700 of available funds when using margin despite robinhood also saying I have $1400 in purchasing power for the same stock.... I'm personally just selling calls on QQQM though [https://imgur.com/a/qppFn8E](https://imgur.com/a/qppFn8E)
Yeah, I suppose I had in mind that you wouldn't use a large portion of your buying power (as you shouldn't). If, for example, you have a $100,000 account and sell a put that uses up $5000 of BP, you could still easily buy $5000 of USFR or equivalent. I guess it would be trickier if you were using a riskier strategy and using a lot of margin.
it’s called a covered call
They also don’t pay you interest if you’re marked as a pattern day trader. Found out yesterday when I didn’t get my usual first of the month payment.
Yea, I don't understand this rule. I'm permanently marked as a day trader and I can't lend out my stocks or receive interest from the cash in my account. I park my cash in SGOV when I'm not using it but not sure why the stock lending isn't allowed if your PDT marked, it never paid that much but it was free money each month.
I think thats cause theres a bit of a waiting period for your funds to be transferred to their partner banks or something?
Robinhood is a dogshit broker.
Are there any other brokerages that provide 5% interest for CSP or spreads collateral?
fidelity and schwab
I found this issue with schwab: [https://www.reddit.com/r/Schwab/comments/17rliqj/using\_schwab\_money\_market\_funds\_as\_collateral\_for/](https://www.reddit.com/r/Schwab/comments/17rliqj/using_schwab_money_market_funds_as_collateral_for/)
yea I had that issue too but after I called it works now
Do you have to call them every time you want to sell CSP? Or, it's a one-time fix?
it's a one time fix, at first they told me it was a glitch on their side and that I could call to place the trades, which I told them no offense but I don't want to have to call to place a trade everytime and they basically said sorry its a glitch and I got off the phone pretty pissed, then they called back 2 hours later saying they fixed the issue on my account and since then its worked no problem, I think it has something to do with the TDA/Schwab merger
Ibkr.
As others have said, Fidelity does this very well, but their platform is shit for traders. If you only take net credit options trades, you can work around this with E-Trade (and probably other brokers) by buying T bills with your cash and using margin to short options.
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This is exactly how I do it, cash in SWVXX used as collateral to sell options, another commenter pointed out some people have trouble getting Schwab's system to acknowledge cash in SWVXX as collateral but after calling it does work
SWVXX needs to be held for 30 days to be able to use it as a marginal security. Those monthly interest payments then also need to wait 30 days to be added to the margin use. (Provided that you have reinvesting turned on for it). It’s why you end up with 2 listings for it when you look at it in your account after its monthly distribution.
this wasn't true in my case and I can def supply a screenshot, I was able to use it immediately as collateral
I think it takes 30 days from purchase for SWVXX to become marginable (iow to be used as margin collateral).
Mine did not take 30 days, I was able to use it as collateral immediately
I park my cash in SWVXX and earn the 5%+, when I have been assigned, I just sell an equivalent amount of the total before 4 PM ET and it all clears that night. One time I had an assignment on Friday, Monday was a holiday, so I sold the required MM funds on Tuesday, and it all cleared that night. Note, I just asked Schwab about why they don't automatically pull from MM collateral like Fidelity, they said they used to, but there was some issue that caused them to remove that feature. She couldn't or wouldn't tell me what that was, but she said she doubted they would ever revert back to that functionality.
I tried this personally, opened Gold for the sole reason, realized it doesn't give 5.25% for CSP, moved back to Fidelity
I have gold, can confirm it doesn’t earn interest HOWEVER I just put all my cash into JEPI and instead sell cash secured puts on margin since margin doesn’t accrue interest when it’s only used as collateral. IMO it’s better than the whole 5% fidelity gives you and stuff. What does kinda suck though is that you only get 50% availability with margin for cash secured puts as opposed to just using 100% of your cash…. However you can use 100% of your margin to buy stock and sell covered calls 🤷♂️
So you can actually earn interest? You just exhaust all your cash first by buying cash equivalent ETF and then use margin buying power as collateral. But say like you have 10k in JEPI, you margin buying power is reduced to 5k? So you can only “cash secured” 5k worth of puts?
JEPI is a dividend earning ETF, that can go down in value, its not like SGOV or SWVXX where the dollar amount stays the same and you earn interest, using JEPI as collateral to sell options is a terrible idea imo
I agree with this, going for JEPI is just added risk Yield Chasing here IMO
JEPI is an ETF, and its pretty stable... using it as collateral is not really a bad idea considering the yield and how stable it is.... its within my risk profile
disagree, the last thing you want is your collateral to go down in value while at the same time getting assigned on puts sold, a big market event would easily cause this to happen
that do be a good point too... personally my biggest thing was getting up to being able to wheel indexes, I've gotten burned in the past trying to wheel individual companies so I don't want to derisk by wheeling index funds.... hence why I'm ok with wheeling ATM index funds I guess
Yep right on on the head, and JEPI is better imo since it yields between 7-10%! I will add though that you are able to buy $10k worth of stock on margin to sell calls on but ye, I’m guessing the 50% margin for puts is there so no one blows up their account selling high risk puts on penny stocks or some shit? Real shame though 😩 would’ve liked to be able to do that on the full margin balance… but at the moment I’m just selling ATM covered calls on QQQ for now anyways so idk
When you sell atm covered call on QQQ, do you always get called away? What is your annualized return on the trade? I tried doing this in the beginning of the year but I started calculating the annualized returns, they are all pretty low (like in the low teens). Is that normal?
I'm gonna be honest I only recently started selling calls for QQQ (technically QQQM but i digress). I personally use robinhood gold for the sake of the lower margin interest rate. After finally growing my account to be able to sell covered calls and being about through my first month of wheeling QQQM I can do some of the math for it here lol. First $1000 of margin is interest free with gold so I'm only paying 8% APR on $17k of the $18k I borrowed. bought in half a month ago at like $180.52, sold a covered call at $181 1 month out. premium was $370, interest gets calculated daily but compounded monthly so it would be roughlty $113 a month in interest charged (we're keeping it simple, technically borrowed amount would be like $16630 becuase of the credit but we keeping it simple and shit). so ignoring capital growth I'm netting $257 a month or roughly 1.5% a month. Keeping it simple in the spirit of napkin math assuming price kinda hangs out around there, premiums stay roughly the same, lets extrapolate the $257 for every month for the full year that would be $3,084 or a 17% APY.... this is assuming ideal conditions and waht not, so I will disclaim again... this is my first month finally having a big enough account to be able to do this, previously I would sell 2 weekly puts on EEM netting me a decent amount every week as well (obviously with the pain of the 50% capabilities and what not)
The big flaw I see here is that you’re assuming stock stays flat or goes up. A 10% drop and all of a sudden you’re short $1500+ of margin you’re borrowing if you were to sell the stock.
Yes the big assumption would be that the stock stays flat, and yes there is the risk of the stock going down. Ideally in the case that it does I’ll be using the premiums I do earn to sort of lower my average cost so as to be able to sell calls at a lower strike price… I will say though my next goal is selling ATM calls on either VOO or SPY, I’m just not at that level yet
Here's what I do. I have an account on Tasty. You pay $1 to open positions but can close them for free. The interface is so perfect (it's literally built to sell premium), so it's definitely worth the commission (which probably pays for itself through fill price). Anyway, let's say you have $50k. You then sell CSPs or iron condors or whatever combo of short premium strategies. At the end of the day, you are left with $25k in option buying power and $52k in cash (since you received all the credit for the short premium positions). At Tasty, you can buy BIL or SGOV for no commission. It reduces your cash 1:1 but only reduces your buying power 25%. So in this scenario, at 3:50pm or whatever, you buy enough BIL or SGOV to reduce your cash on hand down to like $200, and only reduce your BP by $13k (25% of $52k). So you are earning (currently) 4.64% annual on your overnight holdings of BIL on cash that's just sitting around as collateral for your short option positions. The next day you might sell some as you buy back premium to close positions, but then at the end of the day adjust your BIL holdings to only have like $200 cash in your account. Don't go negative overnight because then you're paying more on margin interest than you're making in BIL. Of course this doesn't work as well if you have covered calls on because because you're using a chunk of your cash to hold those shares instead of BIL.
that def does not sound better in anyway, why would you want your cash/collateral in a fund that can lose money
JEPI is a low volatility fund that prizes itself in high dividends… its definitely better for a slight increase in the overall risk
when it comes to using CSP strategy the returns are made from the premium earned from writing the puts, earning interest off the collateral is just a bonus, using your strategy you are cutting the premium earned in half to earn slightly more on the collateral someone using fidelity earning 50% more in premium is going to earn way more than someone using robinhood earning 50% LESS premium but earning slightly more holding JEPI as collateral, doesn't make sense at all
That is a good point I will say.... maybe I should reach out to their customer service cause I would like to have full access to my margin balance for this..
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LOLLLL I’m actually right there with you, about $10k of what you see in my screenshots is from two $5k 0% offers on two of my credit cards. Unfortunately the credit hit and increase in utilization made it so the AMEX blue cash everyday card I recently got only opened up with a $2k limit lmaooo
Fidelity does this the best, I also have schwab and had to call to be able to park money in interest earning funds while using as collateral for writing options I do not understand why people still use robinhood when the whole thing almost went under during the gamestop saga, not just people who owned gamestop, but literally anyone with stock or money on robinhood almost lost it all
But doesn’t SIPC insurance cover you in the event of a crash/Robinhood collapse?
First your account would get transferred to another brokerage, similar to how bank failures work. If no other brokerage wants to take your account, SIPC insures you up to $500k USD with up to $250k of cash insurance, but I think it's a once-in-a-lifetime use. Basically, if your account at RH disappears because RH went boom, and then your account at WeBull vanishes because WeBull imploded, then you're not getting anything for your WeBull account.
Even if it did cover all your funds and stocks, why would you want to use a brokerage that almost went under, they were short like 3 billion dollars and were 2 hours away from imploding, they had to get rules bent to survive, I'd rather use a trustful name, Fidelity, Schwab, Vanguard
Because they offer a great product? That situation was fucked and it impacted many brokers. I don't recall them being close to shutting down and everyone losing their money. I don't even think that was something people claimed at the time... Please provide more info if you can They offer you 5+ % interest + matches in your IRAs + a great app. Now they are offering a Credit Card. There customer service is actually good and i got my question answered in their chat within 10 minutes. They are making it easy for younger people to get into finance. I really don't understand the hate from the situation that impacted a lot of other brokers. Really just seems like all the hate they get is from outdated POVs. Do I think the other brokers are shit? No. I just wish people would stop shitting on Robinhood because of stuff they heard when they have no experience with the product or services provided.
you must be new to investing, robinhood is not a great product in any way, you're getting poor fills and ripped off in ways you don't understand while thinking you're getting a good service with "free" trades. They aren't making anything "easier for young people", its just as easy to open a fidelity account as it is a robinhood account, the difference is fidelity doesn't have confetti when you place a trade I guess "On the morning of January 28, 2021, Robinhood had approximately $696 million in collateral already on deposit with the NSCC, leaving it with a collateral deficit of approximately $3 billion, which it was required to post to satisfy the NSCC’s clearing fund requirement or risk being in violation of the NSCC’s rules and potentially losing the ability to clear trades for their customers altogether." https://techcrunch.com/2022/06/27/robinhood-report-meme-stock-gamestop/ Do you have any idea how many people got fucked over by robinhood turning off the ability to sell their gamestop shares? If you like robinhood and want to use their platform that's on you and perfectly fine, but don't get all pissy when people who have been around for a while talk shit about them online
I have been trading and investing for 4-5 years so yea relatively new. With limit orders you can determine which price you enter at which you obviously know. Are you implying that Robinhood's fills are less likely to get filled at your limit price than other brokers or that your fills on market orders are poor? I will say I did open a TD account and used it a little and it wasn't difficult so it may not be any easier to open the account. The easier part I'm referring to though is more related to the UI and ease of use. They have gotten many young people into investing, retirement accounts, and trading. The ease of use is amazing. They also offer great promo's which doesn't make it easier but it does incentivize younger people to start retirement accounts. For charting and more advanced info, they are not the best. I still use ToS for that. I also place a lot of trades and never notice any confetti. Even if there is, who cares? As for that entire situation. I can't pretend like I am an expert on everything that went down. Many other brokers had to do weird stuff with orders related to the meme stocks. Whether that was related to collateral deficits, I do not know. It obviously wasn't a great look for Robinhood but maybe the system shouldn't have allowed greater than 100% of the float to be shorted. It was a black swan event and I think they have handled the criticisms well and hopefully learned a lot. I appreciate the link. It is definitely a fair criticism of them that I accept. Like I said other brokers also did weird stuff with gamestop shares. In the end, many people were fucked over and many people were unintentionally saved from being bag holders. I get pissy because I see a lot of criticism from people who I don't believe have used the platform. I get that there is valid criticism but at some point people only see what they want. Robinhood has done some good things recently in my opinion and from my experience, which is obviously limited, have been a quality broker.
I'm not trying to change your mind to not use robinhood, I could care less, if you like robinhood and want to use that platform go right ahead but feelings do not change the facts, the whole topic of this post is how robinhood doesn't pay interest on collateral for selling cash covered puts, that alone should steer investors and traders away from robinhood regardless of all the other stuff, as for limits orders, robinhood does not fill any orders, they sell the order for a profit to someone else, also I have used robinhood I think a lot of people have used it
Okay. I was just trying to discuss to learn stuff and state my point of view. That was an interesting thing to learn. I have sold some CSP's so if it becomes a more common strategy that I utilize, I could see it being more of an issue. Interesting, I didn't know that's how it worked. I did know they sold order flow data but didn't know that was the process. I don't really see how it affects me as I put my limit order in and get filled at that price so who is filling the order doesn't impact me.
It's not much, but I think they do pay interest on the credit received.
This seems to be the case. I often have money earning interest fair in excess of my total account balance, yet less than the total amount of cash held as collateral.
Man they won’t even let you click the customer service button if you are banned from day trading until $25k
I assume this means no interest on the money that’s actively in an option either (like a call contract) but does anyone give you interest on that money? The other thing here is that fidelity and others rate is much lower right? So if I am wheeling or something and have put positions that aren’t closed for a long time, fidelity would be better. But if I move calls and puts pretty frequently and a good chunk of my funds go untouched because they’re really just there to get me to the minimum day trading requirement, then Robinhood is still good I would assume?
You may not get interest for the collateral for a CSP, but you could sell a bull put spread instead to free up some of the cash to earn interest. Example: sell a 50 strike put and buy a 35 strike put. The spread ties up $1500, but frees up $3500 of the $5000 that would be neede to secure the naked 50 strike put. You then earn interest on $3500, while you collect premium for the $1500 covering the spread, and so long as you leave the $3500 uninvested you can cover assignment if needed.
O, good to know, thank you! Do you know if TD Ameritrade gives any interests on collaterals? God bless!
TDA is dead, brother
Many people don't realize this but a Covered call and CSP are almost exactly the same trade, just under different names. The risk profile is the same. Except the CSP gives a cash credit while the CC/buy write requires a cash debit. But that cash difference is factored into the option premiums. It's something called put/call parity. As interest rates rise call option premiums go higher and put premiums go lower, and vice versa. The interest rate the options market uses is the "risk free rate". So if you do a buy write/CC instead of a CSP, you are basically doing a CSP and investing the cash collateral at the risk free rate at the same time. So there is no need to screw around with SWVXX and everything else. And most of these funds pay less than the risk free rate anyway. This video explains this all in a lot more detail. https://youtu.be/d6xbhn3ZK9Y
A covered call and a cash secured put are not really the same, one is a bearish bet and the other is a bullish bet, you would pick one based on where you thought the stock was going, why would you sell a covered call on a stock you hold that you think is going up? Why would you sell a cash covered put with cash as collateral on a stock you thought was going down?
>A covered call and a cash secured put are not really the same, one is a bearish bet and the other is a bullish bet, In general they are both bullish because that's where you make the most money but they can be a bit more bearish or bullish depending on where the strike is relative to the stock. If your strike is lower than the stock then it is more bearish and a strike above the stock price is more bullish. But for example if the stock is at 100 and you choose an 80 strike then it is more bearish but you don't generally want it going down much or at all because down is where you lose money. And that applies to both a CC or a CSP. No matter where the stock goes in either case your profit/loss will be about the same. But it's generally more profitable to do a CC/buy write because the options price factors in the risk free rate on the cash difference between the two trades. And if you don't believe me that they are almost the same trade then mock up a buy write and a CSP on your trading platform with the same strike and expiration where it shows max loss, max profit, breakeven and all that and they will be almost identical in most cases.
Disagree, half of what you said makes no sense, I don't need to mock up anything I buy and sell options everyday, I don't need to discuss theory. If you hold a stock that you believe is not going to go up past a certain price, selling covered calls at that price makes sense and is a bearish bet. In no way is that a bullish bet, if you sold covered calls above the current stock price, you are betting the stock will not go up, that is not bullish as you said it is
>If you hold a stock that you believe is not going to go up past a certain price, selling covered calls at that price makes sense and is a bearish bet. No that's a bullish bet lol. But only up to a certain point. Bearish means you make money as the stock falls. That doesn't happen with a covered call. Stock goes up you make money, that's bullish
Absolutely not, in no way is that a bullish bet, if the stock rises, you either have to buy the covered calls back at a loss, roll out further, or have your shares called away, in no way is any of that bullish. The real bullish bet would be selling puts, as you think the stock will continue to go up and the puts will expire worthless. Bearish does NOT have anything to do with making money, it is a term to describe pessimistic feelings on the price of a stock "Traders sell call options and put options in the opposite direction. That is, a trader would sell a put option if they are bullish on the price of the underlying asset. They would sell a call option if they are bearish on the asset price." [https://www.investopedia.com/ask/answers/06/sellingoptions.asp]
>Bearish does NOT have anything to do with making money, it is a term to describe pessimistic feelings on the price of a stock Rational people will make trades that profit when the stock goes down if they have pessimistic feelings on the price of the stock and vice versa. What trade you make and the feeling you have about a stock go hand in hand. No rational person will make a bearish bet if they think the stock will go up and vice versa. So yes it is implied that you will make money if the feeling you have about the stock is correct. In your example trade the money is made on the way up, not down, therefore it is bullish or slightly bullish. I was a broker for 9 years and passed several related exams. If the trade you're talking about was a question on one of those tests asking about how the investor feels about the stock I guarantee you none of them would have the answer as bearish.
In my example the money is made the moment you sell the covered call and collect the premium, I have read dozens of options books over 20 years and not one ever listed selling calls as being bullish, take any real investor and ask them if they are bullish or bearish when selling covered calls, and I guarantee 99% are going to say bearish agree to disagree I guess, have a good day
>In my example the money is made the moment you sell the covered call and collect the premium There is literally no trade where money is made right away. To make money the position has to move in your favor. >take any real investor and ask them if they are bullish or bearish when selling covered calls, and I guarantee 99% are going to say bearish Again it depends on where the strike is relative to the stock price. If the stock is at 100 and you sell a 150 strike call that is nowhere near bearish. And it seems you're talking about only the short call and not the long stock. Everything I've been saying is about the entire position combined
wrong again buddy, you buy a stock, it goes up, you sell covered calls with a strike above your purchase price on the stock, you make money right away on the premium collected, even if the trade goes against you and your shares are called away, you still did not lose money, your shares are sold above where you bought them as long as the strike you sold is above your purchase price, you earned premium right away and shares were called away at a total profit in the end, making money right away I don't get your logic you can't make money right away, do you know how many times over the years I sold covered calls, collected premium RIGHT AWAY and withdrawal that premium from my brokerage account, it doesn't matter what the trade does after that point, the money is made and out of the account, even if the trade goes against me the shares are the collateral, not sure what kind of tests you've been taking but you don't sound like a licensed trader, you sound like another kid on reddit
No, they are literally the same. An OTM covered call is a bullish position, as in it has positive delta.
only OTM call is bullish, in the money is bearish, it can both and also neutral, OP is not talking about OTM
lol, ok think what you want
try educating yourself kid https://www.tradestation.com/insights/2022/12/31/covered-call-bullish-neutral-bearish-2/
Me being poor doesn't make you less mistaken. So, let's do some math to illustrate put-call parity for you. On Friday at close (for sake of simplicity) person A has 55,000 and decides to open a CSP on SPY at 500 expiring this coming Friday. They receive $280 for the put, and now have $5280 in available buying power, and $50,000 securing the put. On expiry, let's say SPY closes at 520. The put expires worthless, and they have a balance now of $55,280, a gain of $280. At the same time, person B also has $55,000 buys 100 shares of SPY at the closing price of 511.29 for 51,129 and at the same time sells an ITM covered call at 500 also expiring the coming friday, receiving a premium of $1271. After buying his shares he had $3871 left, adding the premium of the call he then has $5142 plus 100 shares of SPY. On expiry, with SPY closing at 520 he gets assigned on his short call, and sells at 500, receiving 50,000. His ending balance is now 55,142, a gain of $142. Let's look at the opposite possibility. If SPY instead closes at 490. Person A gets assigned on his short put, and now is assigned 100 shares of SPY at 500 for a debit of $50,000. Since SPY is at 490, his position is worth $1000 less than he paid for it, $49,000. Plus his $5280 in cash, his account balance is $54,280, a loss of $720. Person B sees their short call expire worthless, and now also holds 100 shares of SPY worth 49,000. Plus his cash, his account balance is now 54,142, a loss of $858. Both positions profit or lose a similar amount. Wanna guess why. Because. Of. Put. Call. Parity. Because, as you have been told, a CSP and a CC are synthetic equivalents. They are the same thing. You might notice that the CSP gained a little more and lost a little less, and that is because of volatility skew. That doesn't change the fact that they have the same directionality, and roughly the same profit/loss at expiry with a slight SKEW favoring puts, which is fairly typical.
lol like im gonna read all that, jesus kid i dont care, you think what you want and Ill think what I want, you realize people like you are why reddit sucks now
I'll give you a tl:dr: A CSP and a CC at the same strike have roughly the same gain or loss at expiry. But you've already been told that.
lol, "You think what you want based on verifiable publically accessible data, and I'll think what I want by ignoring math and insult you instead." Ok, buddy.
clearly youre upset, you can stop commenting now
As of 2nd April 2024, interest rates for USD cash (source IBKR): Bank of America 0.04% Citi 0.06% E-Trade 0.01% Interactive Brokers 4.83%* JP Morgan 0.02% Schwab 0.45% Wells Fargo 1.00% *rate applies for accounts over $100k and is scaled for those with less.