Cash-Secured Puts: a plain-English guide
A cash-secured put (CSP) means selling a put option while holding enough cash to buy 100 shares per contract at the strike. You collect the premium now. If the stock closes below the strike at expiration you will likely be assigned and buy the shares at the strike. Your breakeven is the strike minus the premium. The risk is the stock falling well below that.
Data as of .
How it works, step by step
- Pick a stock you would be willing to own at a lower price.
- Choose an expiration (ThetaGrade screens 30–45 days to expiration, aiming for the standard monthly OPEX date).
- Choose a strike below the current price. Delta is a rough, market-implied gauge of how likely the put is to finish in the money.
- Sell to open the put and keep strike × 100 in cash as collateral.
- At expiration: keep the premium if the stock is above the strike, or buy the shares at the strike if assigned.
The math (hypothetical example)
Illustrative numbers only. This is not a quote, a real ticker or a suggestion.
| Strike | $50 |
| Premium received | $1.00 per share = $100 per contract |
| Cash collateral | $50 × 100 = $5,000 |
| Return on collateral | 100 ÷ 5,000 = 2.0% over 35 days |
| Annualized (simple) | 2.0% × 365 ÷ 35 ≈ 20.9% |
| Breakeven at expiration | $50 − $1.00 = $49.00 |
| Max loss (stock to $0) | $5,000 − $100 = $4,900 |
Annualized yield assumes you could repeat the same trade all year. You usually can’t, so treat it as a way to compare trades, not a forecast.
The risks, honestly
- Downside is stock-like. A falling stock can cost far more than the premium you collected.
- Capped upside. If the stock rallies, your gain is limited to the premium.
- Gap risk. Earnings, news and macro events can push the price through your strike overnight.
- Liquidity. Wide bid/ask spreads cost money to get in and out.
- Opportunity cost. The collateral is tied up until expiration or until you close the position.
- Assignment and taxes. Assignment can come early. Tax treatment depends on your situation.
How ThetaGrade screens CSP candidates
The weekly CSP screener runs these published rules on end-of-day data:
- House Rating ≥ 65, with enough data coverage
- No earnings date or estimated window before expiration
- Buy-leaning analyst consensus (≥ 60% buy, consensus ≥ 3.5)
- High implied volatility: IV percentile vs the rated universe ≥ 75
- 30–45 DTE, delta -0.3 to -0.2
- Liquid strike: open interest ≥ 500, volume ≥ 100, spread ≤ 10%
- Annualized yield ≥ 12%
Full details are on the methodology page. Every result shows up on the track record, losers included.
FAQ
- What is a cash-secured put?
- Selling a put option while setting aside enough cash to buy 100 shares per contract at the strike price if you are assigned. You receive the premium up front.
- What is the maximum loss?
- If the stock goes to zero, the loss is the strike × 100 minus the premium received. The premium only cushions the loss; it does not remove it.
- What happens at expiration?
- If the stock closes above the strike, the put usually expires worthless and the seller keeps the premium. If it closes below, the seller is usually assigned and buys 100 shares per contract at the strike. Early assignment is possible with American-style equity options.
- Why avoid earnings before expiration?
- Earnings can gap a stock sharply overnight. ThetaGrade’s screen excludes any name with an earnings date (or estimated window) before the option expires.
- Is this a recommendation?
- No. This page is education. ThetaGrade publishes rule-based screens for all readers; they do not account for your finances, taxes or risk tolerance.
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