Naked Put Return on Margin
Annualized rate of return on selling an uncovered (naked) put, using the broker-imposed margin requirement as the capital base. Same shape as the cash-secured put formula but typically yields a much higher figure because margin is a fraction of the strike.
When to use: Use when you sell puts on margin rather than fully cash-secured. The margin requirement varies by broker and underlying — typically ~20% of the strike for stocks under standard Reg-T rules, but can be higher for volatile names or portfolio-margin accounts.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| IRR | Annualized Return | Simple-annualized return assuming the option expires worthless | % |
| Today | Today's Date | Date the option is sold (trade date) | date |
| Expiration | Expiration Date | Date the option contract expires | date |
| Premium | Premium per Share | Cash credit received per share for selling the option | $ |
| MarginReq | Margin Requirement | Cash margin set aside per share to hold the short position | $ |
Real-Life Examples
Example 1: 30-Day Naked Put with 20% Margin
On April 29, 2026 you sell a 30-day put at a $100 strike for $2.00 of premium. Your broker requires $20 of margin per share.
Given
Step-by-Step
Margin-based returns look enormous — but that headline ignores that an in-the-money put can lose far more than the margin posted. The leverage cuts both ways.
Frequently Asked Questions
For a short put under Reg-T, the typical formula is the greater of (a) 20% of the underlying price minus the out-of-the-money amount plus the premium, or (b) 10% of the strike plus the premium. Brokers may impose higher house requirements; portfolio-margin accounts use risk-based models that can be lower.
Because the denominator is roughly 5× smaller. Cash-secured puts use 100% of strike; naked puts use ~20%. The premium is the same, so the yield is ~5× larger — but so is the loss exposure relative to capital posted.
Tail risk. If the stock gaps below the strike, your loss is the full intrinsic value — not just the margin you posted. Margin can be called intra-trade, forcing closure at a loss. Treat the headline yield as a best-case figure that ignores risk-adjusted realities.