![]() ![]() And though its risk is technically “defined,” it’s defined by the strike price-the price at which you’d be required to buy the stock if you’re assigned-and zero. The high margin requirements for selling cash-secured puts makes them quite capital intensive. The strategy: Turn it into a vertical spread by buying a lower-strike put. And in doing so, you’ll get the added benefit of a substantially lower margin requirement, which can give you some extra options buying power-while taking some of the risk off the table. Looking for a way to protect your current position without giving up too much of your potential profit? There’s a way. Getting nervous about whether your good fortune might continue?Īnd what about the capital you’ve been tying up? Unless you have full options approval (more on that in a bit), your margin requirement is quite high, because it involves having at least enough capital in your account to cover the purchase of the stock, should you get assigned (This is called a “cash-secured” put). And remember: A short option can be assigned at any time up until expiration regardless of the in-the-money amount. ![]() Unless implied volatility has been steadily climbing, you’re probably sitting on a theoretical profit. Let’s say you’re short a single-leg put, and the market has been chopping along, maybe grinding higher. Margin requirements for defined-risk vertical spreads can be substantially lower than for short single-leg put and call options.Turning a short single-leg option into a short vertical spread changes the risk profile.
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