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I have a question about the blogpost https://earlyretirementnow.com/2019/03/27/passive-income-through-option-writing-part-3/ where "Taking more risk with margin cash" is discussed.
I have a separate account (margin) at TD Ameritrade specifically for options selling, and I have always held everything there 100% cash. I have been considering getting into treasuries with some of that cash, with the 10yr Treasury getting closer to 1%.
My question is: if I buy some Treasuries or Bond ETFs, will that decrease my Option Buying Power? From my reading of the blogpost + comments, it seems like it doesn't but I wanted to make sure.
Thanks all!
@earlyretirementnowcom Thanks for the reply, I trade SPX and NDX. I'll be looking for some treasury ETFs now.
Looks like everything in my TD Ameritrade account has 30% impact to my option buying power.
That being said you are ahead even if lower option buying power means you have to convert to spreads, since making income (BAF, PFF, etc.) makes up delta.
@navypack Thanks for the info on that. I'll probably just buy a tiny amount to start to verify the change in buying power.
In one of the posts about this strategy ERN talks about closed end muni bond funds for the margin cash (NZF, BAF, etc.). I dipped a toe into these luckily after they plummeted in value. But now looking ahead.
It seems that I should be able to aggressively tax loss harvest across these funds, which is in theory great - get tax advantaged returns and also write off some of the 1256 gains. Is there any sort of gotcha on tax loss harvesting these closed end munis pretty aggressively? Say, a holding period or a tax issue I should be aware of? I’m already aware of standard wash sale rules but I know sometimes IRS rules are different for tax advantaged assets.
@navypack thanks that’s helpful. This should work well with a quarterly rebalancing schedule where I only consider the 6+ month shares unless some big move happened (which certainly could given this is a leveraged fund).