Cash-secured puts
A cash-secured put pays you to wait for a stock you would be glad to buy below where it trades today. You set aside the cash to buy 100 shares at a strike you choose, sell a put against it, and keep the premium whether or not the stock ever reaches your price. The pages here cover how that works, how to pick the strike, and one example carried through to the outcome.
This section assumes you are comfortable owning individual stocks and have a brokerage account approved to sell cash-secured puts. The one precondition before any of it: only sell a put on a company you would be happy to own at the strike, with the full purchase price already set aside. If you are still deciding whether to hold individual stocks at all, start with Investing first; if options themselves are new, start with what options are.
Start here
Section titled “Start here”- How cash-secured puts work. The mechanics of selling a put against cash you have set aside, and the two ways it resolves at expiration.
- Choosing a strike. How to pick the price you would be content to buy at, and how the premium changes as you move the strike.
- A cash-secured put, worked through. One position from setup to the outcome at expiration, with the numbers shown both ways.
Covered calls are the mirror decision
Section titled “Covered calls are the mirror decision”Selling a cash-secured put is getting paid to set a buy limit order on cash you hold; selling a covered call is getting paid to set a sell limit order on shares you already own. They are mirror images at the mechanics level and otherwise independent.
- Covered calls. The income decision on shares you already hold, judged separately from any put you sell.
Some traders chain the two into a routine called the Wheel: sell puts on one stock until assigned, then sell calls on those shares until they are called away, then repeat on the same name. This handbook treats puts and calls as two independent decisions instead, each judged fresh on whether you would still want to own or sell that stock at that strike today, and does not teach the loop.
Where to go next
Section titled “Where to go next”If you are still building the groundwork, the pages below sit underneath this section.
- What options are. The base vocabulary, if puts and strikes are new.
- Covered calls. The mirror-image income decision, on shares you already hold.
Members can ask questions about a specific position in the community forum.