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I sold puts on margin and got a margin call. What happened?

On margin, the broker held only a small amount for each put. As the stock fell, that amount grew fast, past what your account could cover, and the margin call came before expiry. Here's the math, your choices today, and why cash-secured is the default we teach.

Options guide · 9-minute read · Updated 2026-10-27

What's happening in your account right now

You sold several puts in a margin account. The broker only held a fraction of the strike for each, so the trades fit easily. Your buying power looked healthy.

Then the stock fell. Now there's a notice: a margin call. You need to add money or reduce positions by a deadline, or the broker will reduce them for you. The puts haven't even expired yet.

This page is about getting a margin call before expiry, while the puts are still open. If your puts were already assigned and you can't pay for the shares, read I can't afford the assignment, which covers that moment.

First: the deadline is real. Read the notice and write down the amount and the cutoff time. Then read on.

Why the margin call came early (an illustration, not a trade idea)

You have $10,000 in a margin account. A made-up stock, XYZ, trades at $44. You sell six 30-day $40 puts for $0.80 each and collect $480.

A cash-secured put on a $40 strike would need $4,000 each, so six would need $24,000. On margin, the broker's Margin requirement at the start is roughly $560 per put, using a common formula. Six need about $3,360. Your screen says two thirds of the account is still free.

Two weeks later, XYZ has fallen to $30. Each put is now worth about $10.20. The requirement uses the same formula, but now the put is deep in the money, so it climbs to roughly $1,620 per put.

These are rough numbers. Each broker uses its own formula and can raise requirements at any time, so check yours. The shape is what matters: the requirement grows as the stock falls, just as your equity shrinks. Both move against you at once.

The loss, worked out

The margin call isn't the loss. It's the broker asking you to prove you can carry it. The loss is what the puts would cost to close:

If XYZ keeps falling to $25 and all six are assigned, you'd owe $24,000 for 600 shares worth $15,000, in a $10,000 account. That's how margin turns a bad trade into a debt.

What to do in the next 24 hours

1. Read the notice. Amount, deadline, and what counts toward meeting it.
2. Call your broker if anything is unclear. Ask for the exact cutoff time and whether closing a put frees its requirement right away.
3. Choose what to close yourself. Start with the puts on the stock you'd least want to own. Use limit orders, not market orders: spreads are wide when stocks fall fast.
4. Don't sell new options to raise cash. New premium adds new obligations and usually more requirement.
5. Write down the real result. Every buy-back, at its real price, in your journal.

The aim is to decide for yourself, before the deadline, rather than let the broker decide for you. See my broker closed my position for what happens otherwise.

The same trade, cash-secured

Same $10,000. Cash-secured, you could sell two $40 puts: $8,000 set aside, $160 collected.

Cash-secured still lost money. That's important. But the loss was under a fifth of the account instead of more than half, and nothing was forced.

That's why we treat the wheel strategy as a cash-secured strategy by default. Not because it can't lose, but because the most it can lose is something you've already set aside. Cash-secured vs naked puts walks through the difference in full.

The rule for next time

Even in a margin account, you can sell only cash-secured puts. It's a rule you keep, not a setting:

1. For every put, count strike × 100. That's your real obligation, whatever the broker holds.
2. Add it up across all open puts. Keep the total at or under your cash.
3. Ignore the buying-power number when sizing. It's the broker's estimate of its own risk on a calm day.

In Canada, a TFSA or RRSP can't use margin, so puts there are cash-secured by design where the broker allows them. In the US, IRAs work the same way. Options permissions and margin rules differ by broker, so check yours.

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