Cash-Secured Put Strategy
A cash-secured put is a short put option fully backed by cash equal to 100 shares × strike price. You collect premium upfront in exchange for the obligation to buy the shares at the strike if assigned. It is the bullish-to-neutral half of the wheel strategy.
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How It Works
- 1
Pick a stock you would be comfortable owning and a strike 5-10% below the current price
- 2
Set aside cash equal to 100 × strike (per contract) to cover assignment
- 3
Sell the put at ~20-30 delta, typically 30-45 DTE
- 4
If the put expires worthless, keep the full premium and repeat
- 5
If assigned, you buy the shares at the strike minus the premium collected — effective cost basis is lower than the strike
Best For
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Related Strategies
Wheel Strategy
Systematically sell puts then covered calls to generate income on stocks you want to own.
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Credit Spread Strategy
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Frequently Asked Questions
What is a cash-secured put?
A cash-secured put is a short put option backed by enough cash to buy 100 shares at the strike price if assigned. You collect premium upfront for taking on the obligation.
Do I need margin to sell cash-secured puts?
No. The defining feature is that the position is fully cash-backed — no margin is required. That makes it acceptable in many retirement accounts that disallow naked options.
What happens if I am assigned?
You buy 100 shares at the strike and keep the premium collected. Your effective cost basis is the strike minus the premium. From there you can sell covered calls to continue the wheel, or simply hold the shares.
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Important disclosures
Informational purposes only
Tradewink is published by Tradewink LLC, which is not a registered investment adviser, broker-dealer, commodity trading advisor, or financial planner. All data, signals, and analytics on this page are general, impersonal, and for informational purposes only. They do not constitute investment advice, financial advice, or a recommendation to buy or sell any security or other instrument.
Trading risk
Past performance does not guarantee future results. Trading involves substantial risk of loss, including the possibility of losing more than your initial investment. You are solely responsible for your own trading decisions.
Hypothetical & backtested results
These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.