Margin Mastery: Trade Smarter with Tier 3

Gautam Godse
Jun 3
2 min read

If you’ve been selling puts with a cash-secured strategy, congrats—you’re already playing it safer (and smarter) than most gamblers in the market. But here’s the thing: you’re also tying up a ton of capital that could be working harder. Enter Tier 3 margin—a power-up that unlocks a whole new level of ROI potential without adding unnecessary risk, if you use it wisely.

Let’s break it down.

Tier 2 vs. Tier 3: What’s the Difference?

Tier 2 margin (also known as Level 2 options approval) typically allows you to trade covered calls, cash-secured puts, and a few vertical spreads. It’s the starter pack: safe, slow, and predictable. You still need to front the full cash value when selling puts—$10,000 in buying power to sell one put on a $100 stock.

Tier 3 margin (Level 3 approval), on the other hand, lets you sell naked puts, execute more advanced spreads, and not lock up that full $10K. Instead, you’re charged a margin requirement, often a fraction of the stock’s price, based on volatility, time to expiration, and delta. In short? You get to deploy less capital for the same trade—and that’s where the magic happens.

The ROI Multiplier (With Less Cash on the Table)

Let’s say you’re selling a put on a stable stock like Apple or Costco at a 10-delta (a trade with roughly 90% probability of expiring worthless). With cash-secured puts, you might earn $100 in premium by locking up $10K—an ROI of 1%.

But with Tier 3 margin, your broker may only require $1,500 to $2,000 in margin. Now you’re making that same $100 with just a fifth of the capital. That’s a 5-7% return in a week or two, instead of 1%. Multiply that across multiple low-delta trades, and you’re looking at serious compounding potential.

And no—you don’t need to go wild. With a disciplined approach, a short 1–2 week expiration window, and strict position sizing, Tier 3 margin can be the boost your income strategy needs without taking on oversized risk.

But Wait… Isn’t Margin Dangerous?

Yes, if you treat it like a casino. But we’re not here to YOLO Tesla puts during earnings. This is strategic margin use—focused, low-delta, short-duration trades on quality stocks. You’re not betting the farm. You’re running a business.

If you’ve already nailed the basics and want to unlock the next level of performance from your portfolio, Tier 3 margin is where the pros live. You just need a roadmap.

Ready to Dive In?

I’ve written a brand-new ebook just for you: “Options Trading with Margin”. It’s packed with real examples, margin math breakdowns, risk management tips, and how I use Tier 3 margin daily to generate steady returns.