Options Margin Calculator
Estimate the Regulation T requirement for naked puts and calls, and the defined requirement for spreads you enter.
Buying an option costs the premium and nothing more, and the worst case is known the moment the trade is filled. Selling one is a different kind of commitment: the premium arrives immediately and the obligation lasts until expiry, so a broker holds collateral against it for as long as it stands. That collateral is the short option margin requirement, and this options margin calculator works out how large it is for the position you describe — a figure that decides how many contracts an account can carry long before any question of whether the position is a sensible one.
Formula: naked requirement = greater of 20 percent of spot less OTM amount, and 10 percent of strike, plus premium
Your figures
How the short option is covered, which is what decides the formula applied.
Strike of the short option. On a spread, the leg you sold.
The protective leg you bought. Used only when the structure is a spread.
From your own contract specification. 100 on standard US equity options.
The first term of the naked formula. 20% is the Regulation T minimum — enter your broker's own figure if it is higher.
The floor beneath the first term, so a far out-of-the-money short still requires something. 10% is the Regulation T minimum.
Results
Estimated margin requirement
US$1,700.00
Regulation T estimate, at the percentages entered
- Buying power reductionThe requirement less the credit paid into the account, since the premium is counted on both sides.
- US$1,500.00
- Requirement per contract
- US$1,700.00
- What sets the requirementThe term of the formula that came out highest, and therefore the one applied.
- Percentage of the underlying, less the amount out of the money
- Premium receivedAcross 100 shares.
- US$200.00
- Notional value controlledThe underlying price times the shares the contracts control.
- US$10,000.00
- Requirement as a share of notional
- 17.00%
- Percentage-of-underlying term, per shareThe percentage of the underlying, less how far out of the money the option is.
- US$15.00
- Minimum floor term, per shareThe floor that applies however far out of the money the strike sits.
- US$10.00
- Amount out of the money, per shareZero once the option is in the money, which is when the first term is at its largest.
- US$5.00
- Shares controlled
- 100
What this means
1 contract of a naked short put over 100 shares ties up an estimated US$1,700.00 — US$1,700.00 per contract, or 17.00% of the US$10,000.00 of underlying the position controls. The term that sets it is percentage of the underlying, less the amount out of the money. The US$200.00 credit sits inside that figure and is also paid into the account, so buying power falls by US$1,500.00 rather than by the full requirement. This is an estimate of the Regulation T minimum, not a figure any particular broker has quoted.
- A Regulation T estimate, not a quote. Portfolio margin computes a requirement by stress-testing the whole account and usually lands far below this, while house requirements sit above Reg T and vary by broker, by underlying and over time.
- Confirm the figure with your own broker before sizing a position against it. The only authority on what a position costs to hold is the broker holding it.
- Treats the position on its own. Brokers net offsetting positions across an account, so a short leg that forms part of a larger structure can require less than it does in isolation.
- Requirements are recalculated as the underlying moves. A short option that requires this much today can require considerably more after an adverse move, which is what forces a position to be closed at the worst moment.
- Options on futures and on some index products are margined under SPAN or a similar risk-based regime rather than Reg T, and this formula does not describe them.
Estimated margin requirement: US$1,700.00
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About the Options Margin calculation
In the United States the floor for that requirement on an ordinary margin account comes from Regulation T, and the Reg T options margin formula for a naked short has a distinctive shape: take a percentage of the underlying, subtract however far the option is out of the money, compare that against a flat minimum percentage, and add the premium to whichever came out higher. Every part of that shape exists for a reason, and the reasons are worth understanding before the number is.
That formula and the four other treatments beside it cover a naked short call or put, a cash secured put, a covered call, and a defined-risk credit spread. Those structures are collateralised on genuinely different principles rather than at different percentages, so the same fields serve as a naked put margin calculator and as a spread margin calculator without either being a special case of the other. Whichever you choose, the output gives the requirement for the whole position and per contract, which term of the formula actually set it, how much buying power the position consumes once the credit is applied, and the requirement as a share of the underlying value being controlled.
Both percentages in the formula are ordinary input fields. They default to the regulatory minima, but brokers apply house requirements above those minima — often materially higher on a volatile underlying, and revised without much notice — and the only person who knows what a particular account is subject to is the person holding it. The shares each contract covers is an input for the same reason.
Options Margin formula
shares = contracts × shares per contract
naked short call, per share:
out of the money = max(K − S, 0)
term 1 = a% × S − out of the money
term 2 = b% × K
naked short put, per share:
out of the money = max(S − K, 0)
term 1 = a% × S − out of the money
term 2 = b% × S
requirement = (max(term 1, term 2) + premium) × shares
cash secured put = K × shares
covered call = 0 — the shares held are the collateral
credit spread = (|K short − K long| − credit) × shares
buying power reduction = requirement − premium × shares
(on a spread the credit is already inside the requirement,
so buying power falls by the requirement itself)- S, K
- Underlying price now and the strike of the short option. On a spread, K is the leg that was sold.
- a%
- Percentage of the underlying used by the first term. Defaults to the Regulation T minimum and is editable.
- b%
- The floor percentage beneath the first term, so a distant strike still requires something. Also editable.
- premium
- Received per share on a short option, or the net credit per share on a defined-risk spread.
- out of the money
- How far the strike sits the wrong side of the underlying for the option to have intrinsic value. Zero once it is in the money.
- buying power reduction
- What the position actually removes from the account's capacity to open others, after the credit is applied.
The first term is a rough proxy for how far the position could move against the seller before it starts to hurt. It scales with the underlying, because a larger underlying can move further in absolute terms, and it shrinks by the amount the option is out of the money, because that distance is a cushion the underlying has to travel through before the option has any intrinsic value at all. Once the option is in the money the subtraction is zero and the term is at its largest, which is the regime where the requirement is most punishing.
Left on its own that first term would fall to nothing, and then below nothing, on a sufficiently distant strike. A naked short with an unlimited loss behind it and no collateral in front of it is exactly what the rule exists to prevent, so the second term sits underneath as a floor that never depends on the distance to the strike. In the example below, moving the put strike from 92 down to 75 takes the first term to 0.20 × 100 − 25 = −5.00 per share, at which point the floor of 0.10 × 100 = 10.00 takes over and sets the requirement instead.
The premium is added on top rather than folded into the percentages because the short option is a liability marked to market. The seller has to be able to buy it back at whatever it is currently worth, and the cushion above is meant to cover adverse movement rather than the position's existing value. Note also that the floor basis differs by type: a short call floors against the strike and a short put against the underlying, which keeps the requirement sensible when the two have drifted a long way apart.
The requirement and the buying power reduction are two different figures and the difference matters. The premium sits inside the requirement, and the same premium is credited to the account when the option is sold, so on a naked or cash-secured short it is counted on both sides and cancels: buying power falls by the requirement less the credit. On a defined-risk spread the credit has already been netted off inside the width, and subtracting it a second time would understate what the position costs, so buying power falls by the whole requirement there.
A defined-risk spread needs no percentage of anything. The long leg caps the loss at the distance between the strikes, so the collateral is set to exactly the most that can be lost — the width less the credit already taken in — and no proxy for adverse movement is required because the worst case is a known number. That is the entire reason a spread ties up so much less than the naked short at its centre, and it is worth comparing the two structures on the same underlying to see the size of the difference.
A covered call is the other end of that spectrum and returns nothing at all. The shares already held can be delivered at any strike, so writing a call against them creates no obligation the account cannot meet from what it holds, whatever the underlying does. The calculator says so in words rather than printing a zero, because a bare zero in a currency field reads as a calculation that failed rather than as the answer.
Options Margin: a worked example
Three naked short puts written eight points below the market: underlying at 100, strike 92, premium 1.80 per share, 100 shares per contract, at the 20% and 10% regulatory minimums.
- Shares controlled3 × 100 = 300
- Out of the moneymax(100 − 92, 0) = 8.00
- Term 10.20 × 100 − 8.00 = 12.00 per share
- Term 20.10 × 100 = 10.00 per share
- Per share requirementmax(12.00, 10.00) + 1.80 = 13.80
- Requirement13.80 × 300 = 4,140.00
- Per contract4,140.00 ÷ 3 = 1,380.00
- Premium received1.80 × 300 = 540.00
- Buying power reduction4,140.00 − 540.00 = 3,600.00
- Notional controlled100 × 300 = 30,000.00
- As a share of notional4,140.00 ÷ 30,000.00 = 13.80%
4,140.00 tied up against a position that collected 540.00, so the account's capacity falls by 3,600.00 — 13.8% of the 30,000.00 of underlying the three contracts control. The percentage-of-underlying term is what sets it, because eight points out of the money is not far enough for the 10% floor to matter. Written at 75 instead the first term would fall below zero, the floor would take over at 10.00 per share, and the requirement would be lower but nowhere near proportionally so.
How to use the Options Margin calculator
- Choose the structure first. It decides which of the five treatments applies, and the naked, cash-secured, covered and defined-risk cases give genuinely different answers on the same underlying.
- Enter the underlying price, the strike of the short option and the premium received per share as quoted rather than per contract.
- On a defined-risk spread, enter the long strike as well. The premium field is then the net credit per share, and the width between the strikes does the rest.
- Enter the number of contracts and the shares each one covers, taken from the contract specification you are trading against rather than assumed to be 100.
- Replace the two percentages with your own broker's house requirement wherever it sits above the regulatory minimum. That is the figure the account will actually be held to.
- Read which term set the requirement, then move the strike further out and watch the floor take over. Seeing where that handover happens is the fastest way to understand the formula's shape.
- Compare the naked structure against the defined-risk spread on the same strike. The difference in collateral is usually larger than the difference in credit.
Limitations of the Options Margin calculator
Every calculation makes assumptions. These are the ones that matter here.
- An estimate of the Regulation T minimum, not a quote. Confirm the figure with the broker holding the account before sizing anything against it, because they are the only authority on what a position costs.
- Portfolio margin works on an entirely different principle — a stress test of the whole account across a range of price and volatility moves — and usually produces a materially lower number for the same position.
- The position is treated in isolation. Brokers net offsetting legs across an account, so a short option that forms part of a larger structure can require considerably less than it does on its own.
- The requirement is recalculated as the underlying moves, and this is a snapshot at the price entered. A short option that fits comfortably today can require far more after an adverse move, which is what forces positions closed at the worst possible moment.
- Options on futures and on several index products are margined under SPAN or a similar risk-based regime rather than Regulation T, and none of this formula describes those.
- The covered call returns no additional requirement, but the shares standing as collateral may themselves have been bought on margin. That borrowing is a separate requirement and is not modelled here.
- The cash secured put holds the full strike. Some brokers allow the credit received to reduce the cash set aside from the outset, and this keeps the two figures separate instead.
- Regulation T is a United States rule. Brokers in other jurisdictions margin short options under different regimes, and the percentages here have no standing in those.
Frequently asked questions about Options Margin
What is the difference between the requirement and the buying power reduction?
The requirement is the collateral held against the position. The buying power reduction is what the account actually loses in capacity to open other positions, which is lower on a naked or cash-secured short because the premium received is credited to the account at the same time as it is counted inside the requirement. On a defined-risk spread the credit is already netted inside the requirement, so the two figures are the same.
Why does a covered call show no requirement at all?
Because the shares already held can be delivered at the strike however far the underlying rises, so the call creates no obligation the account cannot meet from what it holds. The collateral is the stock itself. That says nothing about how the shares were financed — if they were bought on margin, that borrowing carries its own requirement, which sits outside this calculation.
Why is my broker's short option margin requirement higher than this?
Because Regulation T is a floor rather than a target. Brokers set house requirements above it, and raise them further on volatile underlyings, on concentrated positions and around events, without needing anyone's agreement. Entering your own broker's percentages into the two fields is what turns this from a regulatory minimum into something resembling the number your account will see.
Why does the requirement rise as the option moves into the money?
Two things happen at once. The amount out of the money that was being subtracted from the first term shrinks to zero, so the term reaches its full percentage of the underlying, and the premium being added on top grows as the option gains intrinsic value. Both push the same way, which is why a short option that was comfortable when it was written can become expensive to hold well before expiry.
What is the minimum floor percentage actually for?
It stops the requirement falling to nothing on a distant strike. The first term subtracts the distance out of the money, and far enough out that subtraction drives it below zero — leaving a position with an unbounded loss and no collateral behind it. The floor is a flat percentage that ignores the distance entirely, so something is always held.
Is the requirement for a credit spread really just the width?
The width less the credit already received, multiplied by the shares the contracts control. That figure is exactly the most the spread can lose, because the long leg caps the loss at the distance between the strikes. Collateral matching the worst case is all that is needed once the worst case is a known, bounded number, which is why no percentage of the underlying appears in that branch.
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