Selling cash-secured puts (CSPs) is one of the most straightforward strategies for generating income or acquiring shares at a discount. Whether you're a beginner learning options or an income-focused investor looking for conservative tactics, CSPs can be a powerful addition to your portfolio.
This guide breaks down how CSPs work, how to sell them step-by-step, how to manage them when things go wrong, and what to do if you're assigned shares you no longer want.
A cash-secured put is an options strategy where you sell a put option while setting aside enough cash to purchase the underlying stock at the strike price.
If the thought of being assigned 100 shares makes you break into a cold sweat, you’re probably approaching cash secured puts all wrong.
Think of selling CSP like agreeing to buy a house, you wouldn’t sign the papers unless you genuinely like the property. The same goes for stocks. If you’re simply chasing premiums and hoping to dodge assignments, cash secured puts are not exactly the best strategy for you.
The right mindset is to only sell puts on companies you will want to own. Businesses with solid fundamentals, earnings and long term potential. Choosing a strike at a price you are willing to buy it at, and it’s like setting a price alarm on your dream stock, only you’re also paid to wait.
Below is a step‑by‑step to selling cash secured puts.
Ensure eligibility – You need options‑trading approval and enough settled cash to cover the strike price × 100 shares minus premium. A cash account is usually sufficient; Brokers will reserve the cash automatically.
Locate the underlying stock – Search for the stock ticker you want to write a put on. Open the options chain for your desired expiration date.
Select the put contract – In the options chain, identify a strike price at or below the price where you are willing to buy the stock. Click on the bid of the put option to create a sell order.
Disclaimer: This example is provided for educational purposes only and does not constitute financial advice or a recommendation to trade.
Set order parameters – In the order ticket:
Submit the order – After verifying details, transmit the order. Once filled, your account will credit the premium and earmark cash to cover a potential assignment
Monitor the position – Watch the underlying stock and option price. If the option stays OTM, it may expire worthless and you keep the premium. If the stock falls below the strike, prepare for assignment (purchase of 100 shares). You may choose to buy back the option (buy‑to‑close) before expiration to lock in profit or limit losses.
Adjust or close – To close the position before expiration, place a buy‑to‑close order for the same contract. To roll, simultaneously close the current contract and sell a new one with a later expiration or different strike.
This is where many traders panic. Your stock is below the strike, but the put hasn’t been assigned yet.
What can you do?
Rolling reduces assignment risk but may lock in a small loss or limit further upside.
Let’s say you sold a put at $100 and the stock plunges to $80. You have three choices:
Your decision at this stage comes down to revisiting your original thesis.
Willingness to own
Consider Opportunity Cost
So you’re assigned 100 shares but no longer want to own the stock. Good news, you’re not stuck. You can simply sell the stock immediately.
Once assigned, your shares are available in your account and can be sold
Alternatively, investors can consider temporarily holding on to the stock and sell covered calls to earn some premiums.
Cash-secured puts are deceptively simple and a rare win-win in the options world. If the stock stays above your strike, you collect premium income simply for being willing to buy. If it dips below, you get the shares you wanted, at a discount to the market price, while still keeping the premium. Either outcome moves you toward your goal, whether that’s generating cash flow or building a position in a quality company.