How is the margin on a naked put calculated?

Under the common exchange and FINRA formula, take 20% of the stock's value, subtract any amount the put is out of the money, and add the option's current price. Compare that with 10% of the strike plus the option's price. The larger figure, times 100 shares per contract, is the requirement. Brokers can set a higher house figure.

What is a cash-secured put?

A short put where the account holds enough cash to buy the shares at the strike if assigned, $5,000 for one $50 put. Because the full purchase price is already set aside, no loan is involved and the requirement cannot climb past what you have. Many brokers allow it in a cash account.

Can a broker raise the margin on a short put after you sell it?

Yes. The requirement is recalculated as the stock and option prices move, usually every day, and the firm is free to lift its own house minimum for a given stock whenever it chooses. If your equity falls below the new figure you get a margin call, and the broker may close the position to meet it.

Selling Puts on Margin: The Requirement Moves Against You

Twenty percent of the underlying value, less the out-of-the-money amount, plus the premium; or ten percent of the strike plus the premium, whichever is greater. That is roughly how a broker’s options disclosure states the requirement for an uncovered put, following exchange rules and FINRA Rule 4210, and brokers are free to demand more. Read quickly, it sounds like a modest deposit. Read with a falling stock in mind, it describes a number that climbs every day the trade goes wrong.

The ledger on the day you sell

Take a hypothetical stock at $55. You sell one $50 put, a naked put with no short stock or cash set aside against it, and collect $1.50 a share, $150 for the contract.

$750 to control a promise to buy $5,000 of stock. It looks efficient. On a $20,000 account it takes under 4% of the equity, and the temptation is obvious: sell six more.

The ledger after the stock falls

Now the stock slides to $48. The put is in the money, and suppose it trades at $3.50.

Two things happened at once. The trade lost $200, and the broker now wants $560 more set aside against it. Both come out of the same equity. The deduction that made the opening figure look small was the out-of-the-money cushion, and it disappears exactly as the stock heads toward the strike, while the premium term grows because it is marked at the option’s current price, so the formula rewards you on quiet days and asks for more on bad ones.

Multiply by seven contracts. The requirement climbs from $5,250 to $9,170, a jump of $3,920, while $1,400 of losses takes equity down to $18,600. No margin call yet. The number that should stop you is different: assignment on seven $50 puts means buying $35,000 of stock in a $20,000 account.

What the requirement never shows

Through all of this, one number stayed fixed. If the put is assigned, you buy 100 shares at $50, which takes $5,000. That was true at $55. It was true at $48. It would be true at $30, when the requirement would be larger still and the shares would be worth $3,000.

Put figures on that last case. Suppose the stock reaches $30 near expiry. The put trades at its $20 of intrinsic value.

The requirement has more than tripled from $750, and the loss on one contract is now more than twice the deposit you started with. The last line is the one worth reading twice. The loss on the put and the loss on taking the shares are the same $1,850, because they are the same obligation described two ways.

The margin requirement is a deposit against the broker’s risk on a given day. The assignment obligation is what you have actually agreed to do. Only the second one tells you what the trade can cost.

The objection: margin exists to be used

The best case for sizing by the requirement is capital efficiency. When the stock stays above the strike, the put expires worthless and the cash set aside behind it did nothing. Why tie up $5,000 when $750 does the job?

The answer is in the second ledger. The $750 does the job only while the stock stays up. The trader who sized by it has to find more money at the worst moment, or accept a forced close at the bottom, and the extra premium collected on the good days is small next to one bad week on a position several times larger than the account could absorb through assignment. Leaving some cash unused is the price of never being forced out.

If you want to see the trade as the buyer of the shares, run the strike and premium through the options break-even calculator: the break-even on this put is $48.50, the $50 strike less the $1.50 collected. The answer on whether you need a margin account to trade options covers the cash-secured version.

Size by the $5,000, unless your account works differently

Applying it takes one multiplication. Count each short put as the cash it would take to buy the shares, $5,000 for one $50 put, and sell only as many as the account could take without borrowing. The requirement then becomes a floor you never get near.

The call stops holding in a portfolio margin account, where requirements come from a model that stresses the whole account across a range of price moves, so the figures above do not apply. Even there, the shares still cost $50 each on assignment.