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 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.