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I can't afford the assignment. What happens now?
Your put is about to be assigned and your account doesn't hold enough cash to buy the shares. That is a margin call waiting to happen. Here is what it looks like, what to do today, and why it can't happen with a cash-secured put.
What is actually happening in your account
Your broker let you sell the put without setting aside the full strike. It held a smaller amount, called a Buying power reduction. Everything looked fine while the stock was above the strike.
Now the stock is below it. Assignment means buying 100 shares at the strike, and the money for that has to come from somewhere. If your cash can't cover it, the broker lends you the difference. That loan has a limit. Cross it and you get a Margin call: add money or close positions, by a deadline, or the broker closes them for you.
None of this is a surprise to the broker. It was in the agreement. It is a surprise to you because nobody showed you the number the day you sold.
The numbers (an illustration, not a trade idea)
Your account held $3,000 in cash and was approved for margin. XYZ was at $45. You sold two 30-day puts with a $40 strike for $1.00 each and collected $200. The broker set aside about $1,600 of buying power, so the trade "fit."
XYZ fell to $31. Both puts were assigned. You now owe $8,000 for 200 shares worth $6,200.
| Line | Amount |
|---|---|
| Cash before assignment | $3,000 + $200 premium = $3,200 |
| Cost of 200 shares at $40 | −$8,000 |
| Cash after assignment | −$4,800 (a loan from the broker) |
| Shares at $31 | $6,200 |
| Account value | $1,400 |
| Loss on the trade so far | −$1,600 |
A $3,000 account is now a $1,400 account carrying a $4,800 loan. The broker's maintenance rule (often around 25% to 30% of the share value, but check yours) wants about $1,600 to $1,900 of equity against $6,200 of stock. You are short. That is the margin call.
What to do in the next 24 hours
Do not ignore it. The deadline is real and the broker's answer to silence is to sell whatever it chooses, at market, when it chooses. See my broker closed my position for what that looks like.
- Read the notice. It says how much and by when. Write both down.
- Call the broker if anything is unclear. Ask what counts toward the call and the exact cutoff time.
- Decide what to sell yourself. Selling 100 of the 200 shares at $31 brings in $3,100, cuts the loan to $1,700 and usually clears the call. Use a limit order near the current price, not a market order at the open.
- Or add cash, if you have it and still want all 200 shares at today's price. Be honest: this is buying more of a stock that just fell 30%.
- Write the real loss in the journal. Selling 100 shares at $31 locks in −$900 on those. Add the paper −$900 on the rest and the +$200 premium: −$1,600 in all.
Whatever you choose, do it before the deadline, on your terms.
Why a cash-secured put can't do this
A cash-secured put sets aside the full $4,000 per contract on the day you sell it. With $3,000 in the account, the broker would not have let you sell even one $40 put, let alone two. The trade that caused the margin call could not have been placed.
That is the whole protection. It is not that cash-secured puts lose less when the stock falls; one put assigned at $40 with the stock at $31 still shows −$800 after the premium. It is that the loss is one you could pay for, on a size the account could hold. In the wheel strategy the cash is the plan, not a formality.
Compare the two accounts after the same drop:
| Margin-secured, 2 puts | Cash-secured, 0 puts possible (or 1 put in a $4,000 account) | |
|---|---|---|
| Cash set aside | $1,600 | $4,000 per put |
| Shares after assignment | 200 | 100 |
| Loan | $4,800 | $0 |
| Loss at $31 | −$1,600 plus a margin call | −$800, no call |
| Who decides what sells | The broker, if you miss the deadline | You, whenever you like |
In Canada, a TFSA cannot borrow at all, so puts there are cash-secured by design where the broker allows them; in the US, IRAs work the same way. Margin rules and option permissions differ by broker, so check yours.
In plain words: "can't afford the assignment" means the put was never cash-secured. Size the put to the cash, not to what the broker will allow.
The rule for next time
Before selling any put, multiply the strike by 100. That is the trade's size. If the number is bigger than the cash you have free, the put is too big, no matter what the buying-power line says.
Two more habits:
- Treat the buying-power reduction as the broker's number, not yours. It is what the broker risks, not what you do.
- Count every open put's full strike value together. If the total is more than your cash, you are already relying on the stock not falling. Our guide on keeping cash aside for assignment shows a simple tracker.
If you sold on margin on purpose and want to understand what happened in more detail, read I used margin to sell puts.
Questions
What happens if I get assigned on a put and don't have the cash?
Your broker lends you the difference in a margin account, and if your equity falls below its minimum you get a margin call. In a cash account the broker usually won't let the put be sold without the full cash set aside.
Can the broker sell my shares without asking?
Yes. If a margin call isn't met by the deadline, the broker can close positions it chooses, at market prices, to bring the account back within its rules.
How much cash do I need to sell a put?
For a cash-secured put, the strike times 100 per contract. A $40 put needs $4,000 held aside; some brokers count the premium you collect toward it. Margin accounts may require less, but the obligation is the same.
Is a margin call the same as losing everything?
No. It's a demand to add money or reduce positions. Acting on it yourself, with limit orders and before the deadline, keeps the loss to the stock's drop. Ignoring it hands the decisions to the broker.
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