Options Income
Cash-Secured Put
Sell a put, set aside the cash to buy the shares if it's assigned, and collect the premium either way. Picking the strike is picking how likely that assignment actually is.
Spin the wheel
Set the strike distance below the current price, then spin. The wheel's two arcs are sized exactly to the odds implied by the strike picked, rust for assigned, green for expired worthless. Where it lands is the outcome.
How it works
- Selling a put is agreeing to buy the stock at the strike, if asked to. "Cash-secured" means the full purchase amount is set aside in cash the whole time, so there's never a moment where the obligation exceeds what's available to cover it.
- Two outcomes, and both keep the premium. If the stock stays above the strike, the put expires worthless and the premium is pure income. If it closes below the strike, the shares get assigned at that price, and the premium simply lowers the effective cost basis.
- A strike closer to the current price pays more because assignment is more likely. That's not a flaw in the trade, it's the entire pricing mechanism. Higher odds of owning the stock is exactly what's being compensated for.
- This is often the entry half of the wheel. Get assigned here, then sell covered calls against the new shares, that's the other half of that cycle, one page over.
Where this breaks
Getting assigned into a stock that keeps falling
The premium collected lowers the cost basis a little, it doesn't stop the stock from continuing to drop after assignment. Spin the wheel at a close-to-the-money strike enough times and the "assigned" outcomes pile up. Nothing about that wheel says what the stock does after assignment, and a cash-secured put on a stock in a real downtrend can mean buying something that keeps getting cheaper, with only a small premium as a cushion.