Cash Secured Put Strategy Guide

The cash secured put is a powerful strategy for generating income while positioning to buy stocks at a discount.

Strategy Mechanics

You Receive: Premium immediately You Risk: Being assigned shares at strike price Cash Required: Strike Price × 100 per contract

Strike Selection

Conservative (Low Assignment Risk)

  • Delta: 0.15-0.20
  • Strike: 8-12% below current price
  • Assignment probability: 15-20%

    • Balanced

  • Delta: 0.25-0.30
  • Strike: 5-7% below current price
  • Assignment probability: 25-30%

    • Aggressive (Higher Premium)

  • Delta: 0.35-0.45
  • Strike: 2-4% below current price
  • Assignment probability: 35-45%

    • Best Practices

  • Only sell puts on stocks you want to own
  • Have a plan for assignment - it will happen
  • Consider dividends - ex-div dates affect puts
  • Watch earnings - elevated IV but binary risk
  • Size positions appropriately - don't overcommit capital

    • Managing Cash Secured Puts

    If Profitable

  • Close at 50% of max profit
  • Let expire worthless if little value remaining

    • If Challenged

  • Roll down and out for credit
  • Accept assignment if you want the stock
  • Close for a loss if thesis changed