@mariyamqureshi

Cash-secured puts are a powerful, low-risk options strategy that allows investors to receive steady income while having the ability to purchase high-quality stocks at a discount, and are thus suitable for conservative investors and long-term investors seeking disciplined access to equity markets without over-leveraging accounts. What is a Short Put? The strategy involves selling put options on a stock you’re willing to own while setting aside enough cash to buy that stock at the strike price if assigned, thereby ensuring that every position is fully covered and eliminating margin risk. This creates a condition where either you are paid to wait or you buy the stock at a lower effective price than its current market price, since it comes with a premium being charged. For instance, if the stock is at $52 and you purchase a $50 strike put for $2, your breakeven is $48—either you profit $200 per contract if the stock stays above $50 or are put the stock at a price you already discovered attractive, now lower still by the premium. It's this two-for-one benefit—high-income and discount-entry opportunity—that makes cash-covered puts so ideal for income-hungry and capital preservation-oriented investors. They are particularly well-suited for retirement accounts where capital is a precious resource and speculative strategies are discouraged. Traders tend to go for puts with 30 to 45 days to expiration to maximize the benefit of theta (time decay) and to avoid the possibility of assignment, and tend to aim for deltas in the range of 0.15 to 0.30 to maintain a high probability of profit, usually 70–85%. Puts selling on sound, fundamentally solid stocks with sound balance sheets, stable income, and reliable dividends reduces the risk of being assigned shares in a declining stock, and choosing liquid tickers with tight bid-ask spreads ensures timely trade execution. Cash-secured puts are also applied in systematic investing, for example, the wheel strategy, where investors sell puts to the point of being assigned, then move on to covered calls for ongoing premium generation. 

Risk is managed by diversification across multiple tickers, using designated trade sizes (i.e., no greater than 5% of total capital per trade), avoiding earnings events except when volatility premia are unusually high, and rolling positions to lower strikes or further expirations if the stock moves against you. Most traders augment their approach by using tools like Thinkorswim, Interactive Brokers, and Tastytrade to screen candidates based on IV Rank, delta, and earnings proximity. The best setups occur when implied volatility is high (typically in downtrending markets or earning uncertainty), which causes premiums to increase and allows traders to make more income while giving the stock sufficient space to fall without crossing the strike. Do not sell puts indiscriminately on any high-premium name—some names trade with high IV for a reason, most often due to binary events or deteriorating fundamentals. Instead, use cash-secured puts as a way of "buying your watchlist on sale" when you already wish to own the company and wouldn't care about holding through short-term volatility. If you get assigned, you're not surprised—instead, you have a job you've applied for, hopefully at a better-than-market cost basis, and can then roll to covered calls or hold for appreciation. This strategy is also tax-optimal in retirement accounts where short-term gains are tax-deferred and encourages disciplined investing by having firm entry targets and risk limits. While market crashes or abrupt corrections will test the strategy, risk-managing managers who do things in the right way by staying diversified, not putting their chips in baskets, and keeping cash to roll or average down will come back and even prosper in times of increased volatility. Lastly, cash-secured puts offer the ideal balance of control, flexibility, and return—they return in flat or up markets and sale-of-entry points on declines while leaving you engaged with your investments and aligned with a long-term portfolio plan. For active speculators and investors who want periodic returns without the emotional rollercoaster of active speculation, few approaches are as consistent, scalable, and logic-based as the well-executed cash-secured put.