What are some good ways to balance the margin increase due to volatility on naked puts. You could hold naked puts work the whole account at only say 50% margin but reduces profitability in calmer markets. Is it worth going long the number of puts to offset the entire account in the event of a sudden down surge in the indexes?
Yes, going long on lower puts. But whether it’s worth it is another question, as you’re getting into various styles of trading options, where people sell vertical spreads or trade ratio and back ratio spreads and broken flies. Each one may have different objectives, and results. For just margin improvement, I’d say vertical spreads could help, unless you can get more of cheap OTM puts to end up with back ratios.
You can only reduce your margin by reducing the risk on the trade. If you are reg t, work the formulas for the margin call. If you are Portfolio margin, work the formulas for that.