Selling Covered Calls and Cash-Secured Puts

Composer supports selling (writing) covered calls and cash-secured puts. These strategies allow you to generate income, in the form of a premium, from your holdings. However, they come with specific collateral requirements that differ from how you might trade long options.

Important: Both covered calls and cash-secured puts require you to hold collateral that's held outside of your symphonies in the form of directly traded shares of a stock or ETF (for covered calls) or in cash (for cash-secured puts).

Covered Calls

What is a covered call?

A covered call involves selling a call option on stock or ETF shares that you already own. You collect a premium upfront, and in exchange, you agree to sell your shares at the strike price if the option is assigned.

Collateral requirements

To sell a covered call, you must:

• Own the underlying shares in your direct trading position (not in your symphonies)
• Hold 100 shares per contract (or the appropriate multiple, which can vary after corporate actions like stock splits)

You cannot sell these shares while they're being used as collateral. If you attempt to sell shares that are securing a covered call position, Composer will block the transaction.

How covered calls affect your account

• Holdings: Your shares remain in your account but are reserved as collateral
• If fully assigned: Your shares will be sold at the strike price, and the option position closes

Cash-Secured Puts

What is a cash-secured put?

A cash-secured put involves selling a put option while holding enough cash to purchase the underlying shares if you're assigned. You collect a premium upfront, and in exchange, you agree to buy shares at the strike price if the option is assigned.

Collateral requirements

To sell a cash-secured put, you must:

• Have sufficient cash in your account outside of symphonies (i.e., it cannot come from the symphony cash remainder)
• This cash serves as collateral and cannot be used for other trades

How cash-secured puts affect your account

• Buying power: Your buying power will be reduced by the collateral amount required for the put
• Cash: The required cash remains in your account but is reserved as collateral
• If assigned: You'll purchase the shares at the strike price using the reserved cash, and the position will close

Important Things to Know

Assignment can happen at any time

Options can be assigned before expiration, not just on the expiration date. While rare, assignment can even occur when options are out of the money.

Symphony assets cannot be used as collateral

Currently, you cannot use shares held within your symphonies or symphony cash as collateral for these strategies. All collateral must come from:

• Direct trading positions (for covered calls)
• Available cash outside of symphonies (for cash-secured puts)

Performance tracking

Options positions are negative value holdings (since you received a credit), and their value changes as the underlying asset moves. This may make your performance stats appear different than you expect:

• The premium you receive shows as an immediate cash gain, which is offset by the negative value of the position to leave account performance relatively unaffected
• As the option value changes, it will show as a corresponding gain or loss
• As the contracts are assigned, the position closes and the net impact is reflected in your returns

Monitoring your positions

You can view your options positions in Holdings and track the trades, assignment events, and trades made for assignment in Order History. If a position is assigned, it will close automatically and you'll see the corresponding share sale (covered call) or purchase (cash-secured put) in your account.