Cash-Secured Put
A Cash-Secured Put sells a put while keeping enough cash aside to buy the stock if assigned. Earns premium and creates a discounted entry plan.
At a glance
Strategy Snapshot
Market View
Sideways to mildly bullish — willing to own at a lower price.
Net Cost
Cash reserved for assignment − Premium received.
Legs
Sell OTM Put (cash reserved for assignment)
Max Profit
Premium received.
Max Loss
(Strike − Premium) × shares (if stock falls to zero).
Breakeven
Strike − Premium received.
Build
Strategy Construction
Color-coded legs — emerald for long positions, rose for short positions. Strikes shown around reference spot 100.
- SELLLeg 1
1 × 95 PE
Premium 2.00
Visualize
Payoff at Expiry
Conceptual payoff with reference spot = 100. Strikes and premiums shown are illustrative.
Sensitivity
Greeks Exposure
Net portfolio Greek exposure for a typical setup. Bars show directional sensitivity from −1 (short) to +1 (long).
Delta
Directional exposure to underlying price.
+0.30
Long
Gamma
Sensitivity of Delta to price changes.
-0.20
Short
Theta
Time decay exposure (per day).
+0.30
Long
Vega
Sensitivity to implied volatility shifts.
-0.25
Short
Strengths
Advantages
Why traders use it
- Earns premium while waiting to enter a stock cheaper.
- Sets a disciplined entry price.
- Theta-positive in low to moderate IV.
Trade-offs
Risks & Disadvantages
What can go wrong
- Limited upside (only the premium).
- Significant downside if the stock falls hard.
- Capital-intensive due to cash reservation.
Avoid
Common Mistakes
Watch out for
- Selling puts on volatile names without conviction.
- Ignoring earnings or macro events.
- Treating it as 'free money' — assignment risk is real.
AI Insight
LiveCash-Secured Puts are ideal for accumulating quality names at a discount. Target 25–30 delta short strikes and 30–45 DTE; close at 50–70% of max profit.
Generated by NextQuantLabs AI — for educational guidance only.
Questions
Frequently Asked
What happens if I'm assigned?+
You buy the stock at the strike price using the reserved cash. Effective cost = strike − premium received.
Should I close before expiry?+
Many traders close at 50-70% of max profit to free capital and reduce assignment risk.