Idle Cash Management
Idle cash is money that is not invested in anything and is therefore not earning investment income. It’s money that is not actually participating in the economy– not being spent on anything and not increasing in value. Therefore, it can’t earn you anything.https://www.betterment.com/resources/how-much-are-you-losing-to-idle-cash/
Last year, when I started to sell cash secured puts, I was committed to never using margin. In my previous definition of never using margin, it meant not enough cash inside the brokerage account to cover the put assignments. Even if most of the puts are out of the money, I would transfer balance from my bank account into the brokerage when there is insufficient balance in my broker. This resulted in a lot of cash in my brokerage account which were untouched, standing by for a options assignment.
Since I am on a margin account and can use my ETFs as collateral instead of cash, I do not need to keep all the cash in the brokerage. I could transfer the cash into the brokerage after the assignment. The cash could either remain in my bank or brokerage earning 0% interest or be invested in very low risk funds to earn additional income.
Therefore, I transferred 18k from my broker account to Singtel Dash EasyEarn. As one of the early subscribers, I get 2% p.a. (1.5% after the first year) of the policy’s benefit. My initial deposit was only 2k, so I did not fully utilize this policy. My idle cash is parked here since I have easy access to the funds when necessary. Furthermore, there are almost no risks since both Tiq and Singtel are reputable companies. Also, the amount deposited is protected under the Policy Owners’ Protection (PPF) Scheme, which is administered by the Singapore Deposit Insurance Corporation (SDIC).
I still avoid using leverage in my trades, but now I define leverage as the ability to sell cash secured puts up to the amount of liquid cash in my overall holdings. As long as there is enough cash available for top-ups when necessary, I think using leverage within the brokerage is fine.
In the meantime, I am still looking for low risk investments similar to SingTel Dash EasyEarn to invest my idle cash in. I’m considering SYFE cash+ portfolio management to hit the 20k, as well as Singtel Dash Pet for 1.3% p.a. returns.