That last distinction is the whole story of this article. A short put funded with cash equal to the full strike value is a cash-secured put; a short put held with only the broker's margin requirement is an uncovered (naked) put. The payoff at expiration is identical. The amount of capital tied up, and the way losses can snowball, are not.
What Happens When You Sell a Put?
When you sell a put you are paid the premium immediately. From then on, three outcomes are possible:
American-style equity options can be exercised by the holder any time before expiration, so assignment can happen early, most often when the put is deep in the money (OCC).
Short Put Payoff Table at Expiration
The numbers here are illustrative: a stock at $50, and a 30-day $45 put sold for $1.20 per share ($120 per contract), before commissions and fees.
| Stock price at expiration | Put value | Profit/loss per contract |
The formulas behind the table:
Unlike a naked call, a short put's loss is capped because a stock cannot fall below zero. But the cap is large relative to the premium: in this example you risk about 36 dollars for every dollar collected.
How Is Margin Calculated on an Uncovered Short Put?
Cboe's strategy-based margin table sets the minimum for a short equity put held in a margin account as 100% of the option proceeds plus 20% of the underlying value, minus any out-of-the-money amount, with a floor of the proceeds plus 10% of the put's exercise price. FINRA Rule 4210 carries the same exchange-level minimums, and brokers can and often do require more.
Using the illustrative trade:
| Step | Calculation | Amount |
Compare that $620 with a cash-secured version of the same trade, where Cboe's table calls for cash equal to the full exercise price: $4,500, of which the $120 premium covers part. The naked seller ties up roughly one-seventh of the capital for the same maximum loss.
Why the Low Margin on a Naked Put Is a Trap
The margin figure is recalculated as the stock moves. If our $50 stock drops to $42, the put is $3 in the money and the requirement climbs: the option's market value plus 20% of $4,200, with no out-of-the-money reduction. A trader who sized five or ten contracts off the original $620 can face a margin call exactly when the position is losing, and the broker may close it at the worst price. That feedback loop, not the expiration payoff, is why brokers usually reserve uncovered puts for higher options approval levels under FINRA Rule 2360. We compare the two side by side in naked puts vs cash-secured puts.
Short Put vs Cash-Secured Put: Same Payoff, Different Funding
If you would be happy to own the shares at the strike and have the cash to pay for them, the cash-secured form removes the leverage problem. Our beginner guide covers that version in detail: what is a cash-secured put, along with what happens at assignment.
Is a Short Put the Same as a Covered Call?
At expiration, yes, in shape. Owning 100 shares and selling a call at a given strike has the same profit-and-loss profile as selling a put at that strike with the same expiration, apart from small differences from interest and dividends. This is put-call parity, and it is why the covered call vs cash-secured put debate is mostly about funding, taxes and dividends rather than risk. Many traders alternate the two in the wheel strategy. The bearish mirror image, shorting stock and selling a put against it, is a covered put, and adding a protective put to a covered call gives you a collar. For the full head-term guides, see our covered call strategy and cash-secured put strategy pages.
Choosing the Strike on a Short Put
Strike choice sets the trade-off between premium and the chance of assignment. A common starting point is a put around 20 to 30 delta; our 20 delta option strategy study shows how often 30-day 20 delta SPX puts actually finished in the money across 36 years of Cboe data. Whatever delta you choose, size the position as if you will be assigned, and check earnings dates, because a gap through the strike turns the maximum-loss row of the payoff table from theory into a real number.
The free cash-secured put calculator runs the breakeven and return math for any strike and premium.
Brokers differ on whether a box counts toward pattern-day or intraday margin rules, how they haircut collateral, and whether they allow the credit from a short box to be withdrawn the same day. Read your firm's options agreement and the OCC ODD, and paper the trade in a simulator before you size it with real capital.
Sources
All option prices in the examples are illustrative, chosen to make the arithmetic clear, and are not quotes. Margin figures apply Cboe's published minimum formula; your broker's requirement may be higher.
By the OptionsPilot Editorial Team. Published November 4, 2026. This article is for education only and is not financial, tax, or legal advice. Options and futures involve substantial risk and are not suitable for all investors. Read the OCC's Characteristics and Risks of Standardized Options before trading options.
