Cash-secured puts
A cash-secured put is a promise to buy 100 shares at a price you pick, with the cash already parked against it, for a premium you keep either way. You get paid to wait. What you give up is the use of that cash and every dollar the stock runs above your strike. Ten articles below.
- The cash-secured put, end to endA cash-secured put is promising to buy 100 shares at a price you pick, with the cash already set aside, in exchange for a premium you keep. One full trade from open to expiry, with every number shown.
- The cash-secured put payoff, and where it breaks evenThe short put payoff is flat above the strike and falls at 45 degrees below it. Break-even is the strike minus the premium. Drawn, with the maximum loss named and the covered call it is secretly identical to.
- Getting paid to set a limit orderA cash-secured put is a limit buy order that pays you to wait. The framing is useful and it is incomplete: the fill rules are different, the timing is different, and one of the differences will eventually cost you a stock you wanted.
- How much cash a cash-secured put really ties upA cash-secured put locks strike x 100 per contract for the life of the trade. On a $25 strike that is $2,500 to collect $55. The number that matters is not the premium, it is the premium against the capital and the days.
- Picking a put strike, by delta and by supportDelta gives you a rough assignment probability and a premium. Support gives you a price with a reason behind it. Four INTC strikes worked out side by side, with what each one actually pays per year of tied-up cash.
- Annualized return on a cash-secured putPremium divided by secured capital, times 365 over days held. On a $25 put sold for $0.55 over 49 days that is 16.4 percent annualized. The formula is easy and three things about it will mislead you if nobody says them out loud.
- Rolling a cash-secured put down and outRolling a tested put means buying it back and selling a lower strike further out. Worked on a real INTC position with the debit shown, the credit version shown, and the case for simply taking assignment instead.
- Cash-secured put versus buying the stock outrightBelow the strike the put wins by a fixed amount, forever. Above a crossover price, buying the shares wins and keeps winning. One NKE trade, both paths, with the crossover price computed.
- Naked puts versus cash-secured putsThe payoff diagram is identical. The margin requirement is not: $443 against $2,500 on the same PFE contract, computed from the Cboe formula. What differs is not the risk, it is how many contracts you will sell and what happens before expiry.
- Cash-secured puts on high-IV stocksHigh implied volatility pays four times the premium because the market prices a real chance of a 40 percent gap. Worked on a biotech that gapped, with what the assigned shares are actually worth and how long selling calls takes to fix it.
Read them in this order
New to the trade: one full put from open to expiry, then what the secured cash costs you, then picking a strike. Those three are the whole trade. The rest is refinement.
Already selling them and want the pages that change decisions: rolling a tested put down and out, what margin does to the same contract, and why the loud premium on a biotech is priced correctly.
What this series will not tell you
That "cash-secured" means safe. Secured is a funding word, not a risk word. It tells you the broker will not margin call you, and it tells you nothing about the shares you are on the hook to buy. The risk on a short put is the risk of owning 100 shares from the strike down, and the premium covers a sliver of it.
It also will not tell you the capital is free. On the running example, $2,500 sits still for 49 days to earn $55. That is 16.4 percent annualized when it works, and it is $2,500 you could not put anywhere else while you waited.
And it will not explain how the OptionsKing confidence score is computed. The gate guarantee is public and the computation is not: nothing below 60 is ever surfaced, 75 is the recommended bar, and how it works covers what that means.
Questions people actually ask
What is a cash-secured put in one sentence?
Promising to buy 100 shares at a price you choose, with the cash to pay for them already set aside, in exchange for a premium you keep whether or not the shares ever get put to you.
How much cash does one contract tie up?
Strike times 100, for the whole life of the trade. A $25 put secures $2,500. That is the number every return on the position gets measured against, not the premium.
Can I lose money selling cash-secured puts?
Yes, and the loss arrives as stock you now own. On a $25 put sold for $0.55 the worst case is $2,445 per contract, reached if the shares go to zero. Assignment means shares bought, not sold.
Is selling a put safer than buying the stock?
Below the strike it beats owning the shares by the premium, every time. Above a crossover price the shares win and keep winning, because your upside stopped at the credit. One trade, both paths works out where that crossover sits.