For example, at Schwab, under the balances pages the following disclaimer can be viewed:
AndCash Secured Put Requirement
Cash Secured Put Requirement is the dollar amount of Cash or Cash Equivalents that is required to be set aside to cover purchase costs should your Cash Secured Put options positions be assigned.
So if an investor writes a cash secured put and that cash is held by Schwab to cover the open option position, is that cash at risk if Schwab declares bankruptcy/goes under? I understand that Swept funds would be held at member banks and subject to FDIC protection limits, but it appears that this does not apply to "unswept" cash based on the disclaimer. Also, my understanding of brokerages is that the customer assets are legally separated and not suppose to be touched by the brokerage, but it's not clear to me if cash set aside to cover an open option position would still be considered property of the investor for purposes of SIPC coverage (250k cash limit?)?Bank Sweep
Bank Sweep deposits are held at one or more FDIC-insured banks that are affiliated with Charles Schwab & Co., Inc. (“Affiliated Banks”). Securities products and services (including unswept or intra-day cash, net credit or debit balances, and money market funds) offered by Charles Schwab & Co., Inc. (member SIPC) are not deposits or obligations of the Affiliated Banks, are subject to investment risk, are not FDIC insured, may lose value, and are not Affiliated Bank-guaranteed. Charles Schwab & Co., Inc. and the Affiliated Banks are separate entities and are all affiliates of The Charles Schwab Corporation.
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