Hi folks,
I am just wondering. "Can SGOV become an alternative to cash balance for cash-secured short options (sell put / call)?"
For example, I place a short put (sell put) on SPY at $580 / $590 (SPY is now $610), with expiration date in a week or two, repeating for a month. So, instead of my $59000 cash doing nothing while waiting for the options to expire, I plan to buy SGOV and hold it for a month so my cash can earn dividends.
I know that if SPY is bullish until the end of the month, then my foray of playing with the collateral money would cause no issue. But my question is, should SPY fell to $580 at expiration, what would happen?
1. Will my broker execute my margin facility so I will run on negative cash balance until I sell my SGOV holdings to pay for the assigned SPY short put?
2. Or will my broker force sell my SGOV holdings immediately so I do not run into negative cash balance?
I am an international trader, so there is no access to US money market funds.
Thank you in advance for any hints.