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I think we have a misunderstanding. When you sell to open a put position you can allow the put to expire worthless as long as the underlying stays above your put price. Where I come from "cover" means closing a short trade - do you mean "exercising" the put completely? If May 150 puts are $2...

Or if the put is stupidly expensive as they can be and the iv off the chart; often prior to earnings. For this to work you are approaching shorting puts as a trader which seems is not a popular background for many of those who post here.

My math is based on the minimum CBOE 20% - my broker is 25%. I understand the minimum margin requirements and also understand it can go up exponentially if the underlying sinks. What risk am I not seeing. That the underlying may go to zero on a black swan event and I could lose everything...

http://www.cboe.com/tradtool/mcalc/default.aspx Well if I wanted to short 50 May 130 puts on MA ~ .30 and the underlying at 171 I'd need min $66,500 for a max profit of $1,500. If I wanted to short 50 May 150 puts on MA ~ 2.00 and the underlying at 171 I'd need min $85,000 for a max...

Clearly a lot of cash is required to short puts. Even in the example of YHOO, if you were shorting the May 14 puts at .45 ~ it looks like you would need $40,000 in your account to short 100 contracts. 14*100*100*.25 (25 % approx margin percentage requirement)=35,000 plus cost of the option...

At the current price of .44 for the May 14 put ~ the margin requirement for shorting 10 puts would be $3510. And they do not use cash collected towards the requirement.

Thanks itembonds and others; just covering my math. Appreciate your indulgence and cautions - absolutely agree this naked puts not for everyone. But if no one every came to America because of risk then this country would become the power it is.

I understand the risk far too well. But I also see the potential if managed properly. I'm interested in the meat and potatoes of fees associated with shorting a put which is why I chose that example of selling YHOO 14 puts. I thought it would be a simple example where someone could say...

thanks itembonds, so not many brokers let you do naked puts for low margin on the underlying I am sensing. For some reason the figure 20% was in my head...thanks again "Trust me writing puts is not as easy as it seems on text or in a book. And many times, the unthinkable will happen to you...

my post was based on this article: http://www.schaefferresearch.com/commentary/content/options+101+put+selling+ahead+of+earnings/observations.aspx?id=92525 The article left out how much margin the individual would need in his account to make such a trade. That is why I posted here. So...

First off, great site - been lurking for a while. I have a question please and hope it is easy to answer. If I shorted 500 contracts of YHOO May 14 put at $1 that would be an purchase of $50,000. I get that. I understand the CBOE has margin requirements for options etc - but...