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Cash-secured vs naked puts: same promise, different danger

A cash-secured put and a naked put make the exact same promise: buy 100 shares at the strike. The difference is whether the money is already in your account. Without it, a drop can cost more than the account holds.

Options guide · 9-minute read · Updated 2026-10-26

The short answer

Both are a short Put option. In both, you collect a premium and agree to buy 100 shares at the strike if the buyer sells them to you.

A Cash-secured put keeps the full strike times 100 in cash, set aside, for the whole trade. A Naked put is sold in a margin account with only part of that money held. The broker covers the rest with a loan if you're assigned.

The obligation is identical. The danger is not. Naked puts let you sell many more contracts than you could ever pay for, and a drop turns that into a loss bigger than you planned, sometimes bigger than the account.

That's why we treat the wheel strategy as a cash-secured strategy, every time.

What the broker actually holds

The smaller amount is called a Margin requirement or Buying power reduction. It is the broker's estimate of its own risk on a normal day. It is not the size of your promise.

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

You have $10,000. A made-up stock, XYZ, trades at $50. Its 30-day $45 put pays $1.00 ($100).

The cash-secured seller can cover two puts: 2 × $4,500 = $9,000 set aside. Premium: $200.

The naked seller sees a margin requirement of about $600 per put. Five puts need about $3,000. The screen says most of the account is still free. Premium: $500.

Then XYZ falls. Both sellers are assigned.

On a calm month, naked looks better: $500 instead of $200. That's the whole appeal.

The drop, worked out

Follow the naked seller at $30:

A $10,000 account is now worth $3,000 and holds a $12,000 loan. The broker wants a cushion of equity against that stock. $3,000 against $15,000 of stock is usually not enough, so a margin call comes: add money or sell, by a deadline. If you don't, the broker sells for you.

At $20, the 500 shares are worth $10,000 and the loan is still $12,000. The account is worth −$2,000. You owe the broker money on top of losing everything you put in.

The cash-secured seller at $20 is down $4,800, which hurts. But they own 200 shares outright, owe nobody, and decide for themselves what happens next.

Why we say cash, every time

It's not that cash-secured puts can't lose. The table shows they can. It's that the loss is one you already agreed to pay for, in a size your account can hold.

Three things cash-secured gives you:

1. You can't oversize by accident. If the cash isn't there, the broker won't let you sell the put.
2. Nobody else decides when you sell. No margin call, no forced sale at the worst price.
3. Assignment is just a purchase. You planned to own the shares at that price. Now you do.

If you've already sold naked puts and the stock is falling, see I used margin to sell puts and got a margin call for what to do next.

Accounts that don't allow naked puts. Retirement accounts usually block them. In the US, IRAs don't allow borrowing, so any put sold there must be cash-secured, if the broker allows puts at all. In Canada, a TFSA or RRSP can't borrow either. Covered calls are widely allowed there; cash-secured puts depend on the broker. Options permissions differ by broker, so check yours.

That rule is not a limitation to work around. It's the same protection, built in.

A simple check before any put

Before you sell a put, in any account:

1. Multiply the strike by 100. That's what you're promising to pay.
2. Add up that number for every open put you have.
3. If the total is more than the cash you have free, you're selling naked, whatever the screen says.

Our keeping cash aside for assignment guide has a simple tracker for this.

Questions