Selling a put without enough cash reserve: high risk, requires broker approval.
The structure
A naked put (Naked Put) is the same obligation without setting aside the full cash: the put is sold on partial margin only. Leverage is higher and the return on the capital held is larger, but the risk is the same across the full strike value.
The key difference from cash-secured
The economics are the same: premium collected in exchange for an obligation to buy. The difference is funding. Partial margin lets you stack obligations larger than the cash available, and that is where the danger sits. A sharp, broad drop calls all the margin at once, at the worst moment.
Maximum profit and loss
Exactly like cash-secured: the maximum profit is the premium, and the loss grows with the drop down to the cap of the stock reaching zero. The difference is that the loss lands on capital that was not fully set aside, so its percentage multiplies.
Hypothetical example
Selling ten puts at a $50 strike on 20% margin (about $10,000 held) with a notional obligation of $50,000. A sharp drop to $40 means a loss near $9,000 on margin of ten times less: ninety percent of the margin gone in one move.
Common mistake
Measuring return against the margin held rather than the full obligation: a return that looks dazzling on margin is an ordinary return on the obligation, and risk is always measured against the obligation.
What exactly you get paid for
The premium is the fee for an obligation to buy the asset at a set level. So the question before selling is not "how much do I collect?" but "do I actually want to own this asset at this price?" If the answer is no, you have sold an obligation you do not intend to honor comfortably.
Where to see it on the platform
The options calculator works out its obligation and breakeven, and its page in this glossary sits next to cash-secured because the difference between them is a lesson in risk management, not in direction.
The calculator works out its obligation and breakeven, and the strategy guide suggests it when expensive volatility meets a willingness to own the stock.
