Paul Price

Watson Pharmaceuticals: A Potent Drug Combination

Claudio,

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All puts written require adequate buying power to be in your [margin type] account to be able to sustain your positions. To be safe you should always have quite a bit more buying power than the minimum requirements.

This buying power requrement does not have to be held as cash. It can be met with 'paid up' equity in any marginable securities. That could be shares of stock, T-bills or any other marginable securities you already own and hold in that account.

That is why I speak about cash-on-cash returns when indicating a best case return. If the puts are never exercised the initial outlay is the only cash you need to lay out. The call and put premiums can go towards paying for the shares you are buying.