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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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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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 or backtested performance results have inherent limitations. Unlike actual trading records, simulated results do not represent real trading and may not account for the impact of market liquidity, slippage, or all transaction costs. No representation is made that any account will or is likely to achieve profits or losses similar to those shown.