Cash-Secured Put Calculator

A cash-secured put is a short put with enough cash set aside to buy the shares if they are assigned. The premium is income if the stock stays above the strike, and a discount on the purchase price if it does not. Either way the trader has agreed to buy one hundred shares at the strike.

When it is used

Investors sell cash-secured puts on stocks they want to own at a lower price. If the stock never falls that far they keep the premium and try again; if it does they get the shares at an effective price of the strike minus the premium. It is the first half of the wheel, where the shares then have calls written against them. It is a bullish-to-neutral position: it wants the stock to stay put or rise.

How it makes and loses money

The maximum profit is the premium, reached if the stock is at or above the strike at expiry. The loss grows one for one with the stock below the breakeven, down to a stock price of zero, exactly like owning the shares from the strike. Before expiry, falling implied volatility and time decay both help; a sharp decline hurts twice, through price and the volatility spike that usually comes with it.

What to check in the grid

The rows below the strike show that the position is almost as exposed as owning the stock, which is the point: it is a way of being paid to wait for a lower entry. Compare strikes: a lower strike collects less but is assigned less often.