How to Sell Your First Cash-Secured Put (A Complete Step-by-Step) 

The Example Used Throughout This Article

A stock you want to own is trading at $72.00. You believe it represents good value at $68.00 or below. You have $6,800 in cash available in your account, which would be required to purchase 100 shares at the $68 strike if assignment occurs. IVR on this stock is 62. Conditions are favorable.

Work through each step in sequence.

Step 1: Confirm Cash Availability and Stock Suitability

A cash-secured put requires enough cash in your account to purchase 100 shares at the strike price. For a $68 strike, that means $6,800 must be available as collateral.

Confirm two things before proceeding. First, the cash is available. Second, and more importantly, you genuinely want to own this stock at the strike price you are considering. If assigned at $68 and the stock subsequently falls to $55, you will be holding shares at a cost basis that is underwater. The cash-secured put is only appropriate on stocks you are comfortable owning at the chosen price regardless of subsequent price movement.

This is not a mechanical check. It is the most important judgment in the entire strategy.

Step 2: Check IVR

Check the implied volatility rank before opening the options chain.

In our example: IVR is 62. Above 50. Premiums are above average. Conditions favor selling.

If IVR were below 30, the premiums on any given put strike would be thin relative to the recent past. The income collected would not adequately compensate for the obligation accepted. This is the moment to wait rather than enter.

Step 3: Open the Options Chain and Select an Expiration

Open the options chain and select an expiration in the 30 to 45 day range.

In our example: 36 days to the next monthly expiration. Select it.

Navigate to the puts side of the chain. On most platforms, puts are displayed on the right side of the chain with calls on the left and strike prices in the center. If the platform shows calls and puts on separate tabs, select the puts tab.

Step 4: Select Your Strike Using Delta

With the puts side of the options chain open, find the delta column. Put deltas are displayed as negative numbers on most platforms because puts gain value when the stock falls. Use the absolute value for strike selection purposes.

The stock is at $72.00. Moving down the chain to strikes below the current price, deltas increase in absolute value as strikes approach the current price and decrease as strikes move further below it.

In our example, scanning the puts:

The $68 put has a delta of negative 0.24. The bid is $0.85, the ask is $1.00, and the midpoint is $0.93. The spread is $0.15. Open interest is 1,204 contracts.

A delta of 0.24 implies approximately a 76 percent probability of expiring worthless. The midpoint of $0.93 represents $93 of income per contract if filled at the midpoint. The effective purchase price if assigned is $68.00 minus $0.93, which equals $67.07 per share.

The critical question: are you comfortable owning 100 shares of this stock at an effective cost of $67.07? If yes, proceed.

Step 5: Place the Order

Open the order entry screen. Select the following:

Action: Sell to Open Symbol: The ticker of the stock Expiration: The date selected in Step 3 Strike: $68 put Contract type: Put Quantity: 1 contract Order type: Limit Limit price: $0.93 (midpoint) Time in force: Day

Place the limit order at the midpoint first. If unfilled after a few minutes, move the limit down by $0.05 at a time. Never use a market order.

Once filled, confirm the premium has been credited: $93 per contract received immediately. Confirm that the brokerage has reserved $6,800 as collateral for the potential obligation.

Step 6: Monitor and Manage

The same two management rules from the covered call apply here.

50 percent profit target: When the put can be bought back for $0.47 or less (50 percent of the $0.93 collected), close the position with a buy-to-close limit order. The most efficient theta income has been captured.

21-day checkpoint: If 21 days remain and the position has not yet reached 50 percent profit, decide whether to close outright, roll to the next monthly expiration for a net credit, or hold through expiration if the stock is well above the strike with a high probability of worthless expiration.

If the stock falls significantly toward the strike before the 21-day mark, do not wait passively. Evaluate whether to close the put for a loss or roll it down and out to a lower strike at a further expiration to give the position more room. The decision framework for managing threatened positions is covered in detail in the rolling article later in this series.

Frequently Asked Questions

How much cash do I need to sell a cash-secured put? You need enough cash to purchase 100 shares at the strike price you are selling. For a $68 strike, that is $6,800. For a $45 strike, that is $4,500. Your brokerage holds this amount as collateral while the position is open. The premium collected at entry reduces your effective risk but does not reduce the collateral requirement. This cash requirement is what separates the cash-secured put from a naked put, which uses margin rather than fully reserved cash and carries significantly more risk.

What is the difference between a cash-secured put and a naked put? A cash-secured put requires the full cash to purchase the shares to be held in the account as collateral. A naked put does not. Instead, a naked put uses margin, meaning you are borrowing the purchasing power from your broker. Naked puts can be placed with far less cash on hand but expose the seller to significant risk if the stock falls sharply, because the collateral backing the obligation is borrowed rather than owned. For individual investors building an income strategy, the cash-secured put is appropriate. The naked put requires much greater experience, discipline, and risk management than the income framework this series describes.

What if the stock I sold a put on drops sharply? A sharp drop in the stock means the put is moving toward the money and potentially into the money. The delta is rising toward negative 0.50 and beyond. The position has an unrealized loss relative to the premium collected. The management decision depends on how far the stock has fallen, how much time remains, and how you assess the stock's recovery potential. Options include closing the put for a loss to limit further exposure, rolling the put down and out to a lower strike at a further expiration for a net credit or small debit, or accepting assignment and owning the shares at the strike price if that price still represents fair value.

📩 Want to see how a 24+ year professional options trader approaches the market?

Subscribe to The Option Premium, my free weekly newsletter where I share:

• Probability-based strategies that actually work: credit spreads, cash-secured puts, the wheel, LEAPS, poor man's covered calls, and more

• Real trade breakdowns with the math behind every decision

• Market insights for any environment, whether we're grinding higher, pulling back, or chopping sideways

No hype. No predictions. Just the frameworks I've used to trade options for over two decades.

📺 Want more? Follow me on YouTube for in-depth tutorials, live trade analysis, and the kind of education you won't find anywhere else.

Connect with me:

• X/Twitter

• Facebook Group

This newsletter is for educational purposes only and should not be considered investment advice. Options trading involves significant risk and is not suitable for all investors. Past performance does not guarantee future results. Always consult with a qualified financial professional before making investment decisions.