How to use the cash-secured put calculator
- Enter the stock price, implied volatility and days to expiration.
- Set the put strike (the price at which you are willing to buy the stock).
- Type the real premium from your broker into the Price column.
- Check the return on cash, the annualized return and the effective buy price.
What a cash-secured put is
You sell a put option and set aside enough cash to buy 100 shares at the strike price. You receive the premium immediately. If the stock stays above the strike at expiration, the put expires worthless and you keep the premium. If it ends below, you buy the shares at the strike.
Key formulas
- Return on cash = premium ÷ (strike − premium). This uses the net cash you actually tie up.
- Effective buy price = strike − premium. If assigned, this is your real cost per share.
- Breakeven at expiration is the same as the effective buy price.
When investors use it
Selling cash-secured puts is a way to get paid while waiting to buy a stock you already want at a lower price. It is also the first step of the wheel strategy: if you are assigned, you start selling covered calls on the shares.
Risks
If the stock falls sharply, you still have to buy it at the strike. Your loss is similar to owning the stock, reduced only by the premium. Only sell puts on stocks you are comfortable holding.
Frequently asked questions
How much cash do I need for a cash-secured put?
Strike price × 100 for each contract, minus the premium you receive. A $48 put requires about $4,800 per contract.
What is the maximum profit of a cash-secured put?
The premium received. It happens when the stock finishes above the strike at expiration.
What is the maximum loss?
Strike minus premium, times 100, if the stock goes to zero. In practice the risk is the same as owning the shares from the effective buy price.
Is a cash-secured put the same as a covered call?
They have very similar payoff shapes at the same strike. The put starts with cash; the covered call starts with shares.
For educational purposes only. Not financial advice. Options involve risk and are not suitable for all investors.