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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺🐝 SILVER
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Number: of 22350 
Subject: Re: Waiting for Godown
Date: 06/30/24 5:35 PM
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Jim, I would like to also sell BRKB DEC puts, but not sure it would make sense for me. To have cash secured puts I would have to sell 3 month T-Bills which are giving me over 5% now. What would be the possible net results.

It depends on what else is in your portfolio.

Generally speaking, you just keep the T-bills and collect the interest (value increase) on those, as well as the time erosion on the put. You don't actually need cash to back up the put, if your account has marginable securities in it. If your account has enough "room" for a bit of margin, then if the put is assigned, you just get the stock, and the broker gives you a margin loan for whatever amount is needed in addition to your cash balance at the time. You'll get a message saying this has happened, so you could just sell the stock the next day. You'd have a margin loan for a few hours. This is my situation at the moment. I have both cash and T-bills, but the puts I've written add up to a bit more than the true cash. If everything were put to me, I'd either have to sell some stock or some T-bills to erase the momentary margin loan. I intend to do the latter--the T-bills are just placeholders till I get some more stock at a good net entry price.

If your portfolio does not have enough asset "room" to withstand a purchase from the assignment, then it's more of an issue. But of course the broker might not let you write the put in the first place, in this situation.

What a broker might do is allow you to write the put, but then only when it's assigned realized that you don't have enough marginable securities to support the purchase of that stock. What they'll typically do in that case is buy the stock for you, realize "oops" your margin balance is too high, then immediately turn around and sell some or all of it.

I guess the main think is to know in advance which of these situations applies to your account.

At Interactive Brokers the interest rate difference between cash and T-bills is not huge, say 5.2% versus 4.7% currently. Depending on your balance because they don't pay interest on the first $10k. So you could just sit with a cash balance and forget the T-bills if you like.

Jim
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
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