Except almost anyone get get authorization to sell naked puts in the US market.
Margin only handles the expected volatility of an instrument, not the tail risk.
Margin only handles the expected volatility of an instrument, not the tail risk.
Your broker is on the hook if you default. This means collateral requirements and risk limits. For example, see TD Ameritrade's rules [1]. These rules are filed with and reviewed by various regulators.
> Margin only handles the expected volatility of an instrument, not the tail risk
This sentence doesn't make sense.
The Federal Reserve's Regulation T limits initial margin to 50% [2]. If you have $10 of cash, you can't buy more than $20 of securities. This limits your losses to twice your principal, which margin lenders are supposed to ensure you can afford (via suitability checks).
This rule is part of why brokers won't accept deposits from credit cards. It's also why they ask you for information on your net worth, income, et cetera. There are further controls in place to make it difficult to e.g. take out a line on your home and use it to buy securities. None of these safeguards exist with cryptos.
[1] https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD... page 11
That is for stocks, with options the margin call can grow to a value quickly where a retail investor cannot afford it ever.
Edit: Looking at td margin schedule shows they'll require 20% in a reg-t account, so only 5 to 1 leverage at least. Still can risk $5k and owe 20k to your broker.