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Naked puts on margin vs cash-secured puts: what the broker is really lending you

A naked put is the same put with less cash behind it. The broker lets you hold only a fraction of the strike, so you can sell more. That works until the stock falls, and then the full bill arrives at once.

Options guide · 10-minute read · Updated 2026-10-26

The short answer

A cash-secured put keeps the full cost of the shares in cash: strike × 100. A naked put sold on margin keeps only a part of it, set by your broker's margin formula.

The put itself is identical. The risk on each put is identical. What changes is how many you can sell with the same account, and who pays if you're assigned. On margin, the broker lends you the rest, and it can demand that money back, or close your trades, when the stock falls.

That's why we start with cash. The leverage is easy to use and hard to unwind.

What the broker actually lends

On a cash-secured $45 put, your broker holds $4,500. If you're assigned, that cash buys the shares. Nothing is borrowed.

On a naked $45 put, the broker might hold only a fraction of that. Formulas vary, but a common style takes a slice of the stock's value, adjusts for how far out of the money the put is, and adds the premium. The point isn't the exact number. It's that the requirement is much smaller than the strike, and it grows as the stock falls.

If you're assigned, you still have to pay $4,500 per put. Whatever cash you don't have, the broker lends you on margin, with interest.

The worked example (an illustration, not a trade idea)

You have a $10,000 account. A made-up stock, XYZ, trades at $50. A 30-day $45 put pays $1.00.

• Cash-secured: each put needs $4,500. You sell 2 and collect $200. $9,000 is held.
• Naked on margin: say your broker wants about $1,000 per put to start (use your broker's real formula). You sell 8 and collect $800. About $8,000 of requirement is used.

On a quiet month, the margin trader keeps four times as much. That's the pull.

Then XYZ slides to $42, then $40.

How the margin call arrives

As XYZ falls toward and below $45, each put gets more expensive. The broker's requirement climbs with it. Before expiry, the 8 naked puts may need far more than the $1,000 each you started with.

If the requirement climbs past what's in the account, you get a margin call: add cash or cut positions, usually by a deadline. If you can't, the broker can close positions for you, at whatever price the market gives that day. You don't choose the price or the timing.

Now say you reach expiry and XYZ is at $40. All 8 puts are assigned:

The cash seller is down 8% of the account and owns 200 shares outright. The margin seller is down 32%, owns 800 shares with a large loan against them, and may face a margin call on the shares themselves.

Every outcome, side by side

At $30, the margin seller has lost more than the whole $10,000 account. They'd owe the broker the difference. The cash seller is badly hurt, but still owns 200 shares and owes nobody.

Why we start with cash

• The size limit is built in. With cash, you can't sell more puts than you can pay for. That limit is a feature.
• No one can close you out. A cash-secured put can be assigned, but a broker won't liquidate it to cover a loan.
• Assignment is calm. The cash is already there. You simply move to the call side of the wheel strategy.
• It's allowed in more places. Naked puts usually need a higher options approval level and a margin account.

If you do use margin later, a common habit is to size as if every put were cash-secured anyway. Then margin is a cushion for timing, not a way to sell more.

Account notes. Naked puts generally aren't allowed in US retirement accounts like an IRA, which can't borrow. In Canada, TFSAs and RRSPs don't allow margin either. Cash-secured puts in those accounts depend on the broker, and options permissions differ by broker, so check your broker's current rules.

If you have been assigned on more shares than you can pay for, see assignment mistakes before you act.

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