When I sell a put on E-Trade, are the proceeds deposited in my account immediately, or when the option expires

Question

When I sell a put on E-Trade, are the proceeds deposited in my account immediately, or when the option expires

Answer 1

All brokerage firms in the United States follow the same rules and regulations and maintain their books and records as of the settlement date of the transaction.

US option settle the business following the date of trade, therefore the proceeds from the sale of option contracts are posted to and available in the account on the settlement date of the trade.

With a question like this, you should give very serious consideration to studying the markets and how they operate before you go any further with any type of trading,

Answer 2

I hate to say this...... but..... you're asking a basic question about one of the most dangerous transactions one can make. You are exposing yourself to unlimited loss.

You should have 5 years or more of option trading experiance. You should have a total understanding of the "Greeks".

Yes.... the proceeds are deposited into your account upon sale.

There's no way you should be considering doing this.

Answer 3

The proceeds are deposited in your account upon settlement, which is the next business day after the trade.

Since the other responses discussed risk, let me add my two cents. Certainly the risk is limited but substantial. However, the risk is less than if you simply purchased an equivalent number of shares.

For example, if a stock is trading for $110 per share and you sold two put options with a strike price of $100 for $5 per share, your maximum risk is ($100 - $5) x 200 = $19,000. On the other hand, if you simply bought 200 shares your maximum risk would be $110 x 200 = $22,000.

However, you need to remember that your maximum profit is limited when you sell naked options. If the example I gave, the most you could make from selling the options is $5 per share, even if the price of the stock doubled. If you had purchased the stock and the price had doubled you would have made $110 per share.

I apologize for going off on a tangent not related to your question, but I thought it was worth spending the time to clarify an issue raised in other responses.

Answer 4

As opposed to what the poster above me said, selling puts is not an unlimited loss transaction.  Selling naked calls is though.  But with selling puts, there is a maximum you can lose, which is the difference in the value of the strike price multiplied by the number of shares the puts cover minus the value of the underlying stock of the puts you sold, if the strike price is greater than the stock price.  So if you sold, say, 10 contracts of IBM puts for $120, the maximum you would lose is $120,000, which would happen if IBM goes to $0.