# What Is a Naked Put? Risk, Payoff and Example Source: https://theoptionsbench.com/what-is-a-naked-put/ > Plain-text mirror for AI/LLM ingestion. Canonical HTML page: https://theoptionsbench.com/what-is-a-naked-put/ --- Updated 3 September 2026 · by Theo Chen A Naked Put is a **Cash-Secured Put with the safety net removed**. Sell the same Put, collect the same premium, hit the same breakeven - the only difference is that nobody set aside the cash to actually buy the stock if you're assigned. That difference sounds small. It isn't. Want the numbers for your own Naked Put? The payoff math is identical to a Cash-Secured Put on the same strike - run it through the calculator below. What the calculator can't tell you is whether your account can actually absorb the assignment; that part is on you. Open the Cash-Secured Put Calculator -> ## How is a Naked Put built? - Sell a Put below the current price (your short Put) - this collects the premium and sets your breakeven. - Skip the cash. That's it. Where a Cash-Secured Put also sets aside strike x 100 in cash, a Naked Put leaves that cash free and lets your broker hold a smaller buying power reduction against the position on margin instead. ## The payoff: identical to a Cash-Secured Put - Max profit = the premium collected, kept in full if the stock finishes above your strike. - Breakeven = strike minus premium - the price at which assignment costs you nothing net. - Max loss = breakeven x 100 per contract, if the stock falls to zero. Large, but defined - not unlimited. ## A worked example A stock trades at $100. With 45 days left you sell the $95 Put for $2.00 - a $200 credit. - Net credit / max profit: $2.00 × 100 = $200, kept if the stock stays above $95. - Breakeven: $95 - $2.00 = $93.00. - Max loss: $93.00 × 100 = $9,300 if the stock goes to zero. Sold cash-secured, those same three numbers come with $9,500 held in cash the whole time. Sold naked, only a fraction of that sits as margin - and a margin call is waiting if the stock gaps down before you can react. Naked Put payoff at expiration Sell the $95 Put for $2.00 (red). Max profit $200 above $95; the loss opens up below the $93.00 breakeven, down to $9,300 at zero. The payoff shape is identical to a Cash-Secured Put on the same strike. ## Naked Put vs Cash-Secured Put - the real difference Wrong way to think about it: "a Naked Put is riskier than a Cash-Secured Put." It isn't - the payoff, the breakeven and the maximum loss are the same number on the same strike. Right way to think about it: a Naked Put substitutes margin for cash, and margin can be pulled away exactly when you need it most - after a drop, when your account's other positions are also underwater and your broker wants more collateral, not less. ## When it makes sense (if ever) Almost never for a retail account. The margin freed up by going naked is real, but it's borrowed convenience, not free money - the day you get assigned on a stock that's already falling is the day you find out whether your account can actually cover it. If you want the trade, secure it: sell the same Put cash-secured, or use a Bull Put Spread to define the loss up front instead of leaving it to your buying power. The bottom line A naked put is a cash-secured put without the cash - same payoff, same breakeven, same maximum loss - the only thing that changes is what stands behind the assignment: a pile of cash you already set aside, or a margin call that can hit at the worst possible moment. ## Frequently asked questions What is a Naked Put in simple terms? A Naked Put is a short Put with no cash set aside to buy the shares if you're assigned - the exact same trade as a Cash-Secured Put, sold on margin instead of backed by cash. The payoff is identical: you collect the premium and keep it if the stock stays above your strike, and you're on the hook to buy 100 shares at the strike if it doesn't. What changes is not the risk on the trade itself - it's whether you actually have the money to take the assignment. What is the difference between a Naked Put and a Cash-Secured Put? Collateral, not payoff. A Cash-Secured Put sets aside the full strike price in cash - $9,500 to sell a $95 Put - so assignment is simply spending money you already budgeted. A Naked Put uses margin instead: your broker holds a fraction of that as buying power reduction, freeing the rest of your account for other trades. The trade-off is that if the stock falls hard, you can face a margin call or a forced liquidation instead of a bill you already set aside. What is the maximum loss on a Naked Put? The same as a Cash-Secured Put on the identical strike: (strike minus the premium collected) times 100 per contract, if the stock falls all the way to zero. It is a large loss, but a defined one - a Naked Put cannot lose more than that, unlike a Naked Call. The danger with the naked version isn't a bigger loss, it's that you may not have the cash on hand to absorb it. How much margin does a Naked Put require? It depends on your broker's formula, but it is always less than the full strike times 100 that a Cash-Secured Put ties up - commonly a percentage of the stock price plus the option's value, with a floor. That is the entire appeal: more buying power free for other positions. It is also the entire risk: your account, not a dedicated pile of cash, is what stands behind the assignment. When does a Naked Put make sense (if ever)? Rarely for a retail account, and never on a stock you would not want to own. Selling naked frees up capital, but the moment you get assigned you owe the full purchase regardless of whether your account has it sitting in cash - margin calls have a way of arriving exactly when a stock has just cratered and everything else in the account is down too. If you want the trade, secure it: sell the same Put cash-secured, or cap the whole thing with a Bull Put Spread instead. ## Related questions - What is a cash-secured put, the version with the safety net? - What is a naked call, the far more dangerous sibling? - How much buying power do options actually use? - What is a bull put spread, the defined-risk alternative?