Unit 2 · Level 2 · Covered calls & cash-secured puts
Cash-secured puts
You'd happily buy a stock you like at €45. It trades at €50. Instead of leaving a limit order, you sell the €45 put and collect, say, €1.20, keeping €4,500 in cash aside. If the stock never dips, you keep the premium and never buy. If it drops below €45, you're assigned: you buy 100 shares at €45, as promised. The catch: assignment usually happens because the stock fell for a reason, sometimes to far below €45.
Free to play. No ads, no token, no account needed to start.
What you get asked
What does 'cash-secured' actually mean?
Strike × 100 sits ready in your account. That's what separates this from the naked put selling League 1 warned about. The obligation is fully funded.
Put the cash-secured put playbook in order
The strategy only makes sense starting from step one. Selling puts on stocks you'd hate to own turns 'getting paid to bid' into 'getting paid to catch knives'.
If the stock closes below your short put's strike at expiry, you'll almost certainly be ___.
In-the-money options get exercised, and the seller gets assigned. You'll see 100 shares per contract appear in your account at the strike price.
You sold a €40 put; bad earnings send the stock to €30. What's the assignment reality?
The strike is a promise, not a suggestion. Net of premium you're down roughly €9 per share instantly. This is why the strike must be a price you truly accept.
What's the hidden asymmetry in 'getting paid to bid'?
The market hands you the shares precisely when news is bad. You wanted the stock at €45 in last month's world. Check the thesis still holds in this one. 🐜
The rest of this unit
Renting out shares and getting paid to bid: income strategies, priced honestly.