What strike cash must be available for one standard 95 put assignment?
Reveal the worked answer
9,500.
The 200 premium is a separate ledger item.
Core Options · OPT-06a · Core
Wheel: the put-selling phase
Would you genuinely own the shares if the put were assigned?
What you will learn and prerequisites
- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.
Read first: Cash-secured put, Covered call
The wheel is a sequence of stock and option decisions, not a machine that converts all outcomes into income. Its first phase sells a cash-secured put on a business the trader is willing and able to own. Premium quality cannot substitute for business quality.
Understand the mechanism
Selling a put creates a possible share purchase at its strike. Cash security concerns funding. The underlying can still fall far below the effective acquisition price. Choosing the highest IV name merely to collect more premium often selects more risk rather than a better investment.
Walk through the process
Before selling, compare outright ownership, a limit order and a protected spread. Set a maximum share allocation and a reason to stop selling if the thesis changes. Assignment is possible, not a required transition on a predictable date.
A worked example
Start a fictional ledger with 10,000 cash. Sell a 95 put for 2.00, receiving 200 and leaving 10,200 cash with an open obligation. This is not 200 realized trading profit while the put remains outstanding. If it expires worthless, the gross premium is retained; if assigned, 9,500 strike cash will be needed. Costs and taxes are separate.
Wheel: the put-selling phase—worked comparison
Vertical: USD; see stage definitions
Horizontal: Ledger stage / settlement case
1. Fictional example
Read the graph as a data table
| Ledger stage / settlement case | Fictional example |
|---|---|
| 0 | 10,000 |
| 1 | 10,200 |
What would invalidate the reading?
A deteriorating business can overwhelm months of collected premium. Calling the process a wheel does not make ownership at the strike attractive.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
What is the critical failure to avoid?
Reveal the worked answer
A deteriorating business can overwhelm months of collected premium. Calling the process a wheel does not make ownership at the strike attractive.
Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome.
Return to the question: Would you genuinely own the shares if the put were assigned? State the observed facts, the assumptions and the failure condition separately.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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