If you sell a put that is backed by margin, do you pay interest on the margin? Like if I sell a 200 put, I need to have $20,000 in case it gets in the money. If I use margin to cover that, I'm not technically borrowing the $20,000 yet, so is interest charged?
If you sell a put, you actually get money, so since you aren't borrowing any money you don't have to pay interest. Furthermore, since you get money from the put, you can then spend that money on something else. However, if you do so, you increase your leverage even further. For instance, some people sell puts and use the proceeds to buy calls in a "synthetic stock" play.
When you sell a put, the brokerage sets aside some of your cash as collateral to cover the purchase of the stock, because after all a put is an obligation to buy. If you are in a non-margin account, the cash is set aside and you cannot use it to purchase. If you are in a margin account, virtual cash is set aside. In a margin account, you are allowed to borrow a margin balance up to the amount that you own, according to reg T rules. The amount you can borrow is your special memorandum account, or SMA. (And, to be honest, i'm really simplifying this here). Selling a put reduces the amount you can buy on margin because the brokerage then withholds some virtual money that is part of your SMA.
Assume you have 1000 dollars and there is a $1000/share stock. Strategy one: You buy 1000 dollars of this stock, and you could go on margin to buy up to 1000 more dollars of it. You will pay margin interest.
Instead, strategy 2 in a margin account: you buy 1000 shares of the stock, you then sell a put with a premium of 300 dollars with a strike price 2 years in the future of 1000 dollars. You will now have 700 (1000-300) dollars invested, and 300 dollars that can still be invested. However, you will need to make a mental note that you are 2x leveraged in that stock. Furthermore, your SMA is reduced by 1000 dollars (the amount that you could have bought on margin) because the put requires 1000 dollars set aside as it has a strike price of 1000. Since you took in 300 dollars from the premium, your SMA ends up being 1000-1000+300=300. In this situation you pay no margin interest.
So that all sounds complicated. If you have an abundance of cash and don't want to leverage yourself over 1.5x, you will never have to be concerned about the above. Your SMA will just naturally recalculate and you will never check the number. The only time this starts to matter is when you get close to that 2x leverage point and start to run the risk of being in a margin call.
One final thought, Sbenson- don't leverage (margin) yourself in the same direction unless you are ABSOLUTELY sure of the move in the short term. Your own example of margin is that- leveraged in the same direction. Instead, use leverage (margin) to pick up positions that hedge each other. I never sell weekly puts because my account is long tesla. I only use a weekly strategy that is opposite to my main holding. That way, the few times that I royally mess up, the worst that happens is that all my tesla is sold, not that i go bankrupt.