How To Sell Put Options: Margin Requirement Explained

So you've probably heard of selling put options, but what are the margin requirements? Many traders are getting it wrong, and that's how they get in trouble.

In this video, I'm going to break it all down for you so that you can understand how it works.

By the end of the video, you should know EXACTLY what is required to sell put options and how options selling on margin works.

Today's Video will cover:
Intro 0:00
What are Margin Requirements 0:35
How do these requirements work 1:33
How much margin is usually required 3:40
Example for those with Tradier 4:21
Why the broker requires so little capital 5:03
The one-stop-shop software that helps YOU 6:08

Learn how to trade The Wheel Strategy in 15 minutes or less:

Recommended Links & Videos:
How To Fly Rescue Missions:



#StockMarket #OptionsTrading #TheWheelStrategy

[jasontaylor]

Just trade 1 contract and do not exceed 50% of your BP!! Love your videos!!!

[alexh.]

But what can you do with the buying power saved by utilizing margin? You need to keep them for 'rainy days' (-in case of assignment); and I assume full cash collateral on secured puts can earn interstes (if broker provides) as well?

[mirevic]

Hello Markus, I'm reading your book at the moment (Complete Guide to Day Trading). On the part "Execute the Plan" you made a really good point, where you went on how you can get caught up in the "planning". And I think this idea must be pushed. The example with losing weight is just perfect. Thank you.

[darrensteves]

Margin can be tricky. I learned that trading futures where the notional was huge. I only use spreads now with futures and mainly trade options.

[Myscentsei]

If one out right OWNS 100 shares of a stock, is it beneficial to do a LEAP Covered CALL a year or so out to collect high premium by setting a low but profitable strike?

[tf]

Love your accent ! But .... requirements and percentages still do not make sense. I am with etrade. I sold a few sept 2023 and jan 2024 TQQQ PUTS yesterday and today ( about 10K in "commitments" to be reserved in case the shit hits the fan and I get assigned ( which I want to ) . ( I go for the more conservative PUTS, less premium but better assignment price ) After I received the premiums, my "cash" balance actually went up by a bit and it says my margin balance is 0. Does the margin "kick in" ONLY if the underlying stock price goes down ? oh BTW trades also show in my "margin tab" as naked puts even though they are not ! I have the cash in the account. Can someone can explain this to me I am lost . TY

[philipple]

Off topic, but what do you do if you get assigned, and the stock keeps dropping?
At the moment I am assigned with all of my capital, and the market is dropping below, this makes me doubt myself.

[maximnikulin]

Hello Markus, what broker is good for options&

[dagobaker]

Do you need lvl 4 options trading to get the 20% buying power requirement?
Im lvl 3 and it shows 100% Bp necessary

[Chris-dwcu]

I have a positive cash balance but a negative margin balance. I think the margin balance is negative because I sold puts right? Does keeping a positive cash balance equal to your negative margin balance reduce your margin fees if you have sold puts? Or does it not matter?

[RedDragonz]

Good thing my risk tolerance is on the lower end! Never risking more than 10% of account until it grows and will be REDUCING risk % to max 5% per trade never tying up more than 50% of account at a time. Doing credit spreads to grow, and for wheel, making sure I have the cash on hand so I never dip into margin.

[deborahgarcia]

Hi Markus, are you still selling puts in this environment? I find it harder and hard to discover a good plays... As IV is not as high as it used to and the risk of downside remains very high in this market, in general. Also, do you have your tradingview/stock screener/filters screenshot?

[karinegasper]

Hi there,
Do you have IBKR brokerage option on your software?

[tocalfa]

Hi Markus. I like your video as I like your Buying power on accounts!!! Shortly I will get it! I apreciate wheeal stratey but I still cant to use, but but but...I sell put options over the indexes. SP500. One time for month. To avoid margin call I simulate a safety price, that if overcame burns the account.For this reason I do not dive but I only wet my ankles ... I prefer brokers offering negative balance protection. It has to reduce small before to become large. Many thanks for your sharing content!!! Ciao!

[thomasd]

Maybe account size has something to do with it, but Charles Schwab reduces my BP dollar for dollar when I sell a cash secured put.
If I sell one put contract with a $103.5 strike, my BP is reduced by $10, 350
$10, 350 is on hold.

[Pss]

You can sell a put and to prevent margin money depleted you can buy far out of money put for lower price and and if you stock closes about the atrike price then u end of collecting premium minus the cost of put you bought..

[moviesurfer]

Hello Markus - What is a reasonable monthly amount I could generate selling puts or wheel strategy with $50K account?

[petkuscinta]

Great video. Waste majority of margin accounts (in Australia anyway) are what I call short term (8 days in case of SAXO) borrowing. This means that traders with $100k should ever only sell options for up to $100k minusd fees to avoid margin call. Basically trat account as if there is no margin at all. Why? Because the margin is there only for one purpose!!! = Allow trader to deposit extra cash if assigned or purchased more that capital in account. In this case broker allows 8 days to use their money till deposit of cash (margin call happens).

Only high net worth (we talking millions) people that have private concierge broker are allowed to have up to 100% loan that they can use for trading without marging calls.

Another issue is that some "margin" accounts are called margin but the broker is charging % of so called "ongoing loan" even if you trade well within limits of your capital. Not on stocks but on selling options. The argument is that because they do not block your cash they consider selling puts as naked (not cash covered) hence they charge % on it.

[omarghosn]

Warning traders about margin is so critical, I have felt that pain :( So with your $68k you can actually open FOUR (4) positions of 6 lots each theoretically, right? That would require $360, 000 to fulfill...YIKES! But the broker will allow it because you are now at 66% margin utilization...about 10-15% below their margin call threshold. I'm assuming most brokers liquidate at around 75-80%....so even a slight movement in price and you could get liquidated - so although the account gives you 2X buying power for stocks, you can actually get in this case 4X leverage...or am I missing something?

[jasgap]

Then why have a margin account? Use a cash account