Subject: Re: Who is doing this buying?
you are tying up lots of cash to secure those far out of the money puts you are short, for a very low return.

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I am trying to process the statement above. I am certainly prepared for any of my outstanding sold puts and calls to be exercised. However, I am not sitting on any cash reserves waiting for that to happen. Last year I was on margin all year. ..
Of course and a big market move I can easily be exposed. A few have traded in the money but on exercise date they expired worthless. Including BRK 160 puts when COVID started. I sold them for about $25 K and at the worst I was sitting on a loss of $300K +. Fortunately they expired worthless.
My only advice is stocks, even stock of large diversified companies, can move big and fast. So I am usually 40%+ out of the money to start. ..

I am not a fan of using broker margin. That's a bit of understatement---if I knew where you lived I'd come over an bonk you on the head : ) Gently, of course.
The reason is that a broker margin loan can be called at any time, with no notice and no reason. And you can be assured that it will be on the most inconvenient day, forcing you to sell things at painfully low prices. I have had it happen, emphasis on the "no reason". The broker's fine print says they may be the counterparty buying my liquidated positions.

And always remember, prices can do anything in the short term...anything. The famous flash crash was not an error in any way...those were the real prices. People just didn't like them, because they demonstrated that the emperor had no clothes. There are too many vested interests, including regulators, who benefit from the majority of investors falsely continuing to believe that prices are "orderly" and that huge sudden drops can't happen.

I agree that it is not so bad relying on the *possibility* of a one-day margin loan to accept stock being put to you for the time it takes to notice and sell it. But I do think that anyone writing puts should have a cash pile backing it up, even if the pile is not actually as big as the option liability. I have occasionally gone as far as $4 in notional assignment value for each $1 in cash on hand, relying on the observation that essentially nobody will exercise a call that, at the current bid, can be sold for a greater benefit because of the remaining time value. But if I did not have any cash at all, I would not write any short put options.

So, back to the first point...if you have a pile of cash of whatever size, you want to make a reasonable rate of return on it. Writing puts against it is one way. It will tie up some of that cash if you write a put option. There isn't very much point in doing so if the rate of return on the cash notionally tied up isn't worthwhile. Given that things can move against you, I normally require a 15%/year rate of return on the time value of any position before I'll consider entering it, and will close early any position where the maximum remaining rate of return drops below around a 6-8%/year rate.

Jim