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
The premium received from the sale of the short put may be applied to meet the initial margin requirement. However, if you sell a put in a cash account, the put must be cash-secured. Please click here to learn more about selling puts in a cash account.
The calculations above only apply to symbols that do not have an elevated margin requirement. Underlyings with elevated requirements are subject to higher buying power requirements determined by our clearing firm due to recent volatility and elevated risk.
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.