Naked Short Put

Naked Put Margin Requirement

Applies when selling uncovered puts in a margin account

The margin requirement for an uncovered put is the greatest of the following calculations times the number of contracts times the multiplier (usually 100):

  • 20% of the underlying price minus the out of money amount plus the option premium
  • 10% of the strike price plus the option premium
  • $2.50

The premium received from the sale of the short put may be applied to meet the initial margin requirement.

However, if you are selling a put in a cash account, then the put must be cash-secured. To learn more about selling an outright put in a cash account, please click here.

Example of selling a naked put in a margin account

Sell to open 1 MAR 45 Put at .50 with the underlying stock at $47.50:

  • [((.2 x 47.50) - 2.5) + 0.50] x 1 x 100 = $750
  • [(.1 x 45) + 0.50] x 1 x 100 = $500
  • $2.50 x 1 x 100 = $250

The requirement for this position would be $750. The $50 generated from the sale can be applied to the margin requirement, resulting in a buying power requirement of $700.

Please note that some underlyings may have elevated margin requirements. For example, volatility products or naked options in cash-settled indices.