Educational content only, not financial advice. Read the full disclaimer.
By Options AI Screener · Last updated 2026-10-12 · 7 min read
Selling cash-secured puts is the plainest income trade in options, and it is also the one most often described in a way that hides what you are agreeing to. You are not renting out your cash. You are selling someone the right to hand you 100 shares at a fixed price, and you are being paid for that obligation. Everything that makes cash-secured puts attractive and everything that makes them dangerous follows from that one sentence.
When you sell one put contract you take on an obligation to buy 100 shares at the strike price, at any point up to expiry for an American-style option. "Cash-secured" means you have set aside the full purchase price so the obligation can always be met.
That capital figure is the number that matters and the one most often left out. A $50 strike ties up $5,000 per contract. Not the $110 of premium you collected — the $5,000 you had to promise. Any return you quote on this trade should be measured against the $5,000, which is the same point made in more detail in the wheel strategy walkthrough, where assignment is the mechanism rather than the accident.
These numbers are illustrative and chosen to be round. They are not a quote or a recommendation.
A stock trades at $54. You sell a 30-day $50 put and collect $1.10, so $110 for one contract, against $5,000 set aside.
Annualising that first outcome gives roughly 27%, and this is where care is needed. Annualised return answers "what if I could repeat this all year", which you cannot, because the opportunity will not always exist and one assignment changes the arithmetic. It is a tool for comparing two options of different lengths, not a projection.
There is no correct strike, only an explicit trade-off, and it runs in one direction: premium and assignment probability move together.
A useful shorthand is delta. The absolute delta of a put approximates the probability it finishes in the money, so a 0.30-delta put is roughly a 30% chance of assignment and a 0.15-delta put roughly 15%. The lower-delta strike is further away and pays less. Nothing you do changes that relationship; you only choose where on it to sit.
Two other inputs deserve weight:
Cushion. The distance from the current price to the strike, as a percentage. A 20% cushion on a stock that routinely moves 15% in a month is not the same as 20% on one that moves 4%. Cushion only means something relative to how much the stock actually moves, which is why the screener shows implied volatility beside it.
Liquidity. A wide bid-ask spread is a real cost paid twice, once entering and once if you close early. A put quoted $1.00 bid and $1.30 ask has a mid of $1.15, and you will not reliably get the mid on both ends.
Implied volatility is the market's estimate of how much the stock will move. When a put pays unusually well, the most common reason is that the market expects a large move — an earnings report, a court date, a regulatory decision. The premium is compensation for that, not a mispricing you spotted.
This has a practical consequence. Sorting a list of cash-secured puts by yield reliably produces a list of names with events inside the window and strikes close to the money, because those are the two things that raise premium fastest. Whether that premium is genuinely rich is a different question from whether it is large, and it is covered in how probability of profit is calculated and how far to trust it.
A reasonable cash-secured put tends to share a few features: a stock you would hold, a strike with cushion that is meaningful relative to the stock's own volatility, a tight bid-ask spread, an expiry that clears any scheduled event, and a size where assignment would be an inconvenience rather than a problem.
The Cash-Secured Put screener shows these together — cushion, annualised return against committed capital, delta and liquidity — so the trade-off is visible rather than buried in one yield number. None of that is advice about a specific trade, and the part that decides the outcome is the one the screener cannot check for you: whether you actually want the shares.
It means the full purchase price is set aside and not used for anything else. A $50 strike requires $5,000 per contract. Brokers may let you sell the same put on margin at lower capital, which is a different trade with different risk, because the loss is no longer bounded by cash you have already allocated.
The maximum loss is the strike less the premium, times 100, and it occurs if the stock goes to zero. That is rarely the practical case, but it is the honest bound. A $50 strike with $1.10 collected has a maximum loss of $4,890 per contract.
Many sellers close once most of the premium has decayed, because the remaining premium is small relative to the risk still carried. Buying back a put for $0.10 that was sold for $1.00 frees the capital and ends the obligation, keeping 90% of the credit for a fraction of the holding period.
You are assigned at the strike regardless of how far below it the stock trades. There is no partial protection. This is why the strike should be a price you would genuinely pay, not simply a price you think will not be reached.