Cash-secured puts, risk first: what you agree to buy and what it can cost
Selling a cash-secured put is a promise to buy 100 shares at the strike, even after the stock has collapsed. An illustrative payoff and breakeven, why it has the same shape as a covered call, early assignment, gap risk, sizing by the loss and a pre-trade checklist.
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In this video
- 0:00 Intro
- 0:28 The promise
- 0:51 The payoff
- 1:10 Same shape
- 1:32 Assignment
- 1:53 Gap risk
- 2:15 Sizing
- 2:41 Checklist
- 2:58 Free calculator
Key points
- Selling a put is a promise to buy 100 shares per contract at the strike; cash-secured means holding strike x 100 in cash.
- Illustrative: stock at $50, sell the $45 put for $1.10. Breakeven $43.90, maximum gain $110, maximum loss $4,390.
- US equity options are generally American-style, so a short put can be assigned early, especially when deep in the money.
- A cash-secured put has the same basic payoff shape as a covered call: capped gain, nearly all of the stock's downside.
- Only sell a put at a strike where you would buy the stock today, sized by the loss you can take, never by the premium.
Examples use round, illustrative numbers and are not actual trades or results. Education only — not investment, tax or legal advice. Narration uses two AI-generated voices.
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