Cash-Secured Put, Explained

What it is

You sell (write) a put option and set aside enough cash to buy 100 shares at the strike if you're assigned. In exchange you collect a premium today. You're agreeing: "I'll buy this stock at the strike — and you pay me for the promise."

The numbers

Stock at $52; you sell the $50 put for $1.50 ($150 per contract), setting aside $5,000.

• Max profit: the premium — $150. Reached if the stock is above $50 at expiry (the put expires worthless).
• Max loss: if the stock went to $0 you'd be forced to buy at $50, losing $5,000 minus the $150 premium = $4,850.
• Breakeven: $48.50 (strike minus premium).

Your worst case is essentially the same as owning the stock — but with a lower entry and a premium cushion.

When to use it

When you're neutral-to-bullish and would genuinely be happy to own the stock at the strike. If you wouldn't want the shares, don't sell the put. High IV Rank makes the premium fatter.

Common beginner mistakes

• Selling puts on stocks you don't actually want to own, chasing premium. The premium is high because the risk is real.
• Selling through earnings by accident.
• Selling a put without the cash set aside (a "naked" put) — far riskier and margin-intensive.

How TickerRisk helps

Screen for fat premium with the IV Rank screener, use Edge Score to avoid premium that's just disguised risk, and check the calendar for catalysts before you sell.