The cash-secured put (CSP) strategy generates income from portfolios, but there's widespread confusion about what "cash-secured" actually means. Unlike margin-based short puts, a true cash-secured put requires 100% of the strike price × contract size held in cash reserves.
What Cash-Secured Actually Means
A cash-secured put is exactly what it sounds like: you must have enough cash in your account to purchase the underlying shares at the strike price if the option is exercised. For UK single-stock options (1,000 shares per contract), this means:
Cash requirement = Strike price × 1,000 shares
Example: Selling a £5.00 put on Vodafone requires £5,000 in cash reserves (£5.00 × 1,000 shares). This cash is held aside and cannot be used for other trades until the option expires or is closed.
Cash-Secured vs Naked Short Puts
Many traders confuse cash-secured puts with naked/short puts that use margin:
- Cash-Secured Put: Requires 100% cash reserves. No margin used. Lower risk, lower capital efficiency.
- Naked Short Put: Uses margin (typically 20-50% of strike value). Higher risk, higher capital efficiency.
The broker margin requirements you often see (IBKR 20%, Saxo 25%, IG delta-based) apply to naked short puts, not cash-secured puts.
UK Broker Requirements for Cash-Secured Puts
All major UK brokers require the same thing for true cash-secured puts: 100% of the strike value held in cash. Here's how they handle it:
Interactive Brokers (IBKR)
IBKR automatically treats short puts as cash-secured if you don't have margin enabled or if your account lacks margin approval. The system reserves:
Cash reserve = Strike price × 1,000 shares
With margin enabled, IBKR requires only 20% for naked puts, but this is a different strategy with different risk.
Saxo
Saxo requires explicit cash segregation for CSPs. When placing the trade, you must select "cash-secured" mode, which locks the full strike value in your cash balance.
Without this selection, Saxo applies 25% margin requirements for naked short puts.
IG
IG's platform automatically determines whether a put is cash-secured based on your available cash. If you have sufficient cash to cover 100% of the strike value, it's treated as cash-secured.
For margin-based short puts, IG uses delta-based calculations (typically 30-60% of strike value).
Worked Example: Vodafone Cash-Secured Put
Let's compare cash-secured vs naked put requirements:
- Stock: Vodafone trading at £5.50
- Strike: £5.00 put, 30 days to expiry
- Contract size: 1,000 shares (UK standard)
Cash-Secured Put Requirement: £5,000 cash (£5.00 × 1,000)
Naked Short Put (Margin) Requirements:
- IBKR: £1,000 (20% of £5,000)
- Saxo: £1,250 (25% of £5,000)
- IG: ~£1,500-£2,000 (30-40% delta-based)
When to Use Each Strategy
Cash-Secured Puts are best for:
- Beginners learning options (lower risk)
- Traders who actually want to own the stock at the strike price
- Accounts without margin approval
- Conservative income generation
Naked Short Puts (with margin) are best for:
- Experienced traders with margin approval
- Capital efficiency (5× more positions with same cash)
- Higher-risk, higher-reward strategies
- Portfolios with diversification to offset risk
Key Takeaways
1. Cash-secured means 100% cash reserves — not 20%, 25%, or delta-based percentages.
2. The margin requirements you see advertised (IBKR 20%, Saxo 25%, IG delta) apply to naked short puts, a different strategy.
3. UK single-stock options are 1,000 shares per contract — calculate cash requirements accordingly.
4. Choose cash-secured for safety and learning; choose naked puts (with margin) for capital efficiency once you understand the risks.