Earn Interest While Selling Cash Secured PUTs?

Here’s how I make the most of my cash in brokerage accounts(Fidelity, Charles Schwab, and Vanguard). I use a straightforward strategy called the Wheel Strategy with options. This strategy allows me to generate more money using the cash I already have.

FYI: I’ve been playing with Selling and Buying Options for years now, so much of this is based on real-life experiences and direct conversations with my brokerage’s customer support services.

A while ago, I saw the market was too overvalued, a possible AI tech bubble and cashed out near the top. While sitting on the sidelines, my money(pre-tax retirement, post-tax retirement, and non-retirement investments) was collecting about 5% interest while parked and waiting for the pull-back on the stock market.

While waiting, I Started Selling Cash Secured PUTs.  

My aim was to earn premium while strategically selecting strike prices I was willing to buy stock(in this case, ETF’s) at a discount. This way, I could re-enter the stock market when good stocks(ETFs) go on sale, maximizing my potential returns.

A good question was asked: Does my money still earn interest in the sweep accounts while I make premium selling cash-secured puts?

Earning Interest Selling Cash Secured PUTs?

Yes! You can earn interest while selling cash secured PUTs.

I’ve been online and even talked to a customer service rep. While my cash-secured puts are unassigned, the collateral remains in the Sweep Account, earning interest.

So, while generating income with the Wheel strategy, my money passively earns income. At the same time, I wait for the market to dip enough to buy back in.

What Happens When Assigned Stocks For Your PUTs?

Once your sold PUTs are in the money, ITM, they have an intrinsic value, and someone can exercise the option to force you to buy the stock(or ETFs) at the strike price.

At the close of the day, after being assigned the stocks, your money is removed from the Sweep Account to cover the stock purchases. Once the money is out of the Sweep Account, the funds removed will no longer earn interest.

What Happened To Me, And Am I Upset?

The market recently declined, which I’m sure was influenced by the Geopolitical issues in the Middle East.

This decline was more than anticipated, causing my sold PUTs to be ITM. Those Stocks(ETFs) were PUT to me.

A large chunk of my Sweep Account was Swept Away.  

Am I Mad? NO!

I picked good-quality securities (URL), and I coped well with the situation. Now, the value of the securities is below the original PUT strike price, meaning I paid more than the current value of the stocks/ETFs, but I’m good.

What Now?

The money is from Sweep Accounts, which is not earning me more interest.

I will soon be moving into the next step of the Wheel Strategy and will be selling CALLs. So now, my money invested in stocks/ETFs will be earning me more premium than when I was selling PUTs.

I’m betting the market will bounce back up, my shares will be CALL-ed away from me, and the money will again earn interest.

Special Note About The Sweep Account.

Even when assigned shares for my ITM PUTs, all the money remaining in my Sweep Account continues to earn interest. As I continue to collect premiums from the Wheel Strategy, I will have enough to sell additional PUT options.  

Collecting additional money will reward me with premium and interest, and I’ll be “double-dipping” with both a Passive Income Generator(“interest”) and a Semi-Passive Income Generator(“selling options”).

Suggestions?

With my win-win situation, any feedback? Please leave a comment below.

Tom, Growing His Passive Income Generators.
Myself with an interesting Bull Sculpture.
Notice: No Lambo’s. :/
Hi I’m Tom, A Blogger And A PIG Farmer.

PIG Farmer as in I grow Passive Income Generators(PIG’s).

I’ve been playing with stocks, mutual funds, and options for decades, as well as always working on my side hustle stacks.

Unlike what you read online, I’ve yet to find a way to get rich quickly. Get Rich Quick isn’t happening for me.

My journey has been long and continues. I hope to have so many PIGs I can stop working at my current job and volunteer as a medical worker overseas. 

Still waiting, but getting there. I still am a family man, and while on this Journey of Growing PIGs.  

I wanted to share my adventures(ups and downs), hoping you will contribute with your feedback and comments.

Fun Fact: In my spare time, I am a Band-Dad!

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