Does Fidelity Pay Interest Earnings on Cash-Secured Puts?
Here’s a summary of the main problem and solutions discussed in the post:
- Main Problem: The user is unsure whether they earn interest on collateral when using cash-secured puts in an options money market account.
- Solution 1: The user will earn interest on the collateral as long as the option contract remains open.
- Solution 2: Although the funds set aside for the cash-covered put are not available for trading while the contract is open, they will still accrue interest in the core position.
Here’s the full thread
I’m wondering if I earn interest on collateral with Cash secured puts in a options money market account
Yes you earn interest on collateral
Hi, @Muted. We apologize for the delayed response, but I wanted to provide some additional information.
The funds set aside in your cash-covered put reserve do continue to earn interest as long as your option contract remains open.
When you hold an open cash-covered put, sufficient cash to cover the exercisable value of the contract will be held in a “Cash-Covered Put Reserve” balance. This is not available to use for trading so long as the contract is open. During this time, your balances, specifically your “Cash available to trade” and “Cash available to withdraw,” will be reduced by the reserve amount; however, the funds will still be in your core position, and again, will continue to accrue interest.
Cash Covered Puts: https://www.fidelity.com/learning-center/smart-money/cash-secured-put
Please feel free to follow up here with any additional questions.
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Thank you