Bullish options strategy
Cash-secured put
Sell a put with cash set aside to buy the shares. You are paid to agree to buy the stock at a lower price.
BullishHigh IV (selling rich premium)Defined riskLevel 4 · Selling premium
Cash-secured put payoff
An example on a $100 stock with 30% implied volatility. The dashed line is the profit or loss at expiry; the solid line is what the position is worth today.
The trade
Sell 1 $96 put · 45 days · $2.25
Net credit $225
Max profit$225
Max loss−$9,375
Break-even$93.75
Chance of profit73%
How it works
- You collect the premium up front.
- If the stock is above the strike at expiry, the put expires and you keep the premium.
- If it is below, you buy 100 shares at the strike. Your real cost is strike − premium.
When to use it
- There is a stock you want to own, at a price below today's.
- Implied volatility is high, so the premium is rich.
Managing the trade
- Only sell puts on stocks you are genuinely happy to own.
- Many traders close at 50% of the premium to free the cash early.
- If assigned, you can sell covered calls on the shares: this cycle is called the Wheel.
Risks
- If the stock collapses you still buy it at the strike. The worst case is the strike × 100 minus the premium.