How is a cash-secured put different from a covered call?

They are the options income equivalent of each other. A cash-secured put lets you buy stock at a discount. A covered call lets you sell stock at a premium. Both generate income with defined risk. Many traders cycle between the two — selling puts to acquire stock, then selling covered calls against those shares.

What strike should I choose?

Most sellers choose a strike 5–10% below the current price — far enough to provide a margin of safety, close enough to collect meaningful premium. The further OTM the strike, the less premium you collect but the less likely you are to get assigned.

What happens if I'm assigned?

Your broker buys 100 shares at the strike price using your reserved cash. You now own the stock at your target entry. Many traders then sell a covered call against those shares to continue generating income.

Do I need a margin account?

No. The cash-secured part means you're holding enough cash to cover assignment — so no margin is required. Most brokerages allow cash-secured puts in standard accounts.

How is a cash-secured put different from a covered call?

They are the options income equivalent of each other. A cash-secured put lets you buy stock at a discount. A covered call lets you sell stock at a premium. Both generate income with defined risk. Many traders cycle between the two — selling puts to acquire stock, then selling covered calls against those shares.

What strike should I choose?

Most sellers choose a strike 5–10% below the current price — far enough to provide a margin of safety, close enough to collect meaningful premium. The further OTM the strike, the less premium you collect but the less likely you are to get assigned.

What happens if I'm assigned?

Your broker buys 100 shares at the strike price using your reserved cash. You now own the stock at your target entry. Many traders then sell a covered call against those shares to continue generating income.

Do I need a margin account?

No. The cash-secured part means you're holding enough cash to cover assignment — so no margin is required. Most brokerages allow cash-secured puts in standard accounts.

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Cash-Secured Put Calculator

A cash-secured put generates income by selling the right to buy stock below the current price. You collect premium upfront and either keep it or buy shares at a price you already chose.

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How a Cash-Secured Put Works

You sell a put option on a stock you'd be willing to own, and set aside enough cash to buy 100 shares at the strike price if assigned. You collect the premium immediately. If the stock stays above your strike at expiration, the put expires worthless and you keep the premium. If the stock falls below your strike, you buy 100 shares at that price — which you already decided was acceptable.

Example: A stock is trading at $50. You sell the $45 put expiring in 30 days for $1.20 per share ($120 total) and set aside $4,500. If the stock stays above $45: you keep $120 and your cash. If the stock falls to $43: you buy 100 shares at $45, but your effective cost after the premium is $43.80 per share.

Maximum Profit, Maximum Loss, and Breakeven

Maximum profit: The premium received. In the example, $120. This is the most you can make regardless of how high the stock goes.

Maximum loss: (Strike price − premium received) × 100. In the example: ($45 − $1.20) × 100 = $4,380. This occurs if the stock falls to zero — identical risk to buying the stock at $43.80.

Breakeven at expiration: Strike price minus premium. In the example: $45 − $1.20 = $43.80.

When to Use a Cash-Secured Put

A cash-secured put works best when you want to buy a stock at a lower price than it currently trades. Selling the put at your target entry pays you to wait. It also works well when implied volatility is elevated — higher IV means more premium collected for the same obligation. If IV drops after entry, the put loses value faster, which benefits the seller.

Read the cash-secured put strategy guide →

Frequently Asked Questions

Related strategies

Covered Call

The income strategy for stock you already own.

Long Put

Buying a put to profit from a decline.

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