Quantool · Reading CoursesFictional examples · no live trading
Core Options · OPT-02c · Core

Cash-secured put

How does cash-secured put express a bullish-to-neutral ownership view?

One concept per page · original written lesson · 573 prose words · authored, not installed or production-approved

What you will learn and prerequisites

Read first: Read a contract and its premium, Rights, obligations and expiration, Defined payoff risk is not margin, Read the whole multi-leg ticket

A cash-secured put is an offer to buy shares at a strike in return for premium. The cash reserve funds that promise; it does not make the business safer. Ask whether ownership makes sense at the effective price before admiring the premium.

Construction: read every leg

Selling a 95 put for 2.00 receives 200 and can require buying 100 shares for 9,500. Breakeven is 93 before costs. Above 95 at expiry the credit remains; below 95 liability grows. If the shares become worthless, the loss is 9,300, not the 200 premium.

Read the ticket before the graph

BUY means you own an option right; SELL means you accept a short-option obligation. Positive quantities are long and negative quantities are short in the calculation. Check quantity, call/put, strike, multiplier and expiry before netting premium.

All legs in this example share November 20, 2026 expiration. The entry observation is October 6, 2026, with fictional QLT at 100. These are independent illustrative premiums, not a current option chain or executable quotes. The terminal diagram assumes every leg and any shares are resolved at one common settlement price.

Before expiry: time and volatility

The usual exposure is positive Delta, negative Gamma and negative Vega. Time often helps the seller, but a sharp decline can increase the cost to close while IV rises. High premium can be compensation for serious event risk.

Manage the position deliberately

Compare the put with buying shares, a limit order and a protected put spread. If the business thesis breaks, a lower price is not automatically an invitation to own more. A roll closes one obligation and opens another; record the old result instead of erasing it.

Fictional teaching ticket · no order submission

Cash-secured put

QLT • reference spot $100 • independent illustrative prices • quote date 2026-10-06

Read action, quantity, type, strike, expiry, premium and multiplier before the payoff
ActionQtyTypeStrikeExpiryPremium/unitMultiplier
SELL1Put952026-11-202100
Opening option cash (+received / −paid)200 USD
Entry option fees in cost variant0.65 USD
Shares included0
Joint-terminal results—not a guarantee of interim cash requirements
MeasureBefore costsAfter stated entry fees
Maximum terminal profit200199.35
Maximum terminal loss magnitude9,3009,300.65
Breakeven settlement price(s)9393.0065

This is a mathematical expiry experiment using the displayed legs, not an executable quote. The slider range is not a risk limit.

$0.65 per option contract on entry only. No exit, assignment, financing or tax costs modeled.

Independent fictional premiums, not one simultaneous arbitrage-consistent chain. All legs realized simultaneously at intrinsic at the same expiry; terminal calculations do not model American early exercise, temporary unhedged positions, forced liquidation or live liquidity. Displayed chart domain is not a tail-risk cap.

From opening cash to a settlement result

Read the opening instructions: sell 1 95 put at 2.00. Option opening cash is $200.00 received as a credit. A received credit is not earned profit while the obligation remains open.

Set the common settlement price to 90.00. Calls have intrinsic value max(S−K,0); puts have max(K−S,0). Subtract the opening premium from each intrinsic value, then multiply by signed quantity and the 100-unit multiplier. Shares contribute their price change from their own cost. The calculation popup shows every leg.

The combined result is $-300.00 before costs and $-300.65 after illustrative opening fees of $0.65. Exit fees, slippage, funding, dividends and taxes are not included. Opening fees are 0.65 per option contract, not a statement of any broker's pricing.

Maximum terminal profit is $200.00; maximum terminal loss magnitude is $9,300.00, before costs. Isolated zero-P/L settlement points in the model: 93. Move the scenario slider across each strike and explain why the slope changes there. A strike is a contract threshold, not a prediction.

This terminal model is useful for comparing risk shapes, but actual American-style assignment, share delivery, forced liquidation or a failed multi-leg exit can produce a different path. A long protective leg is not an automatic instruction that a broker must exercise it when another leg is assigned.

Open the calculation without leaving this lesson

Calculate this exact ticket

Same-page calculation. Closing restores the lesson position and originating control.

P/L = Σ[q × multiplier × (intrinsic − opening premium)] + shares × (S−share entry) − costs

Intrinsic is nonnegative before the signed quantity is applied. This is a fictional terminal calculation.

  1. -1 × 100 × (5.00 − 2.00) = $-300.00: 95 put.
  2. Opening fees: 0.65.
Before costs $-300.00; after entry fees only $-300.65.

Maximum risk and breakevens

Same-page calculation. Closing restores the lesson position and originating control.

Evaluate S=0, all strikes and the final tail slope; solve P/L=0 on each linear segment.

Same-expiry payoffs are piecewise linear. A finite chart range cannot prove a tail is bounded.

  1. Maximum terminal profit is $200.00; maximum terminal loss magnitude is $9,300.00, before costs.
  2. Breakeven points: 93.
  3. Costs shift net P/L downward without moving the strikes.
Maximum terminal profit is $200.00; maximum terminal loss magnitude is $9,300.00, before costs.

The whole ticket at common expiry

Vertical: P/L per complete ticket (USD)
Horizontal: Underlying settlement price (USD)

The whole ticket at common expirySolid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range. The complete numerical data are available below.-1,435.71-1,081.56-727.402-373.248-19.0949335.05980869298104110
1. Combined terminal P/L before fees2. Combined terminal P/L after entry fees
Solid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range.
See the individual legs behind the combined curveThe whole ticket at common expirySolid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range. The complete numerical data are available below.-1,435.71-1,081.56-727.402-373.248-19.0949335.05980869298104110
1. Combined terminal P/L before fees2. Combined terminal P/L after entry fees3. Leg 1: SELL 1 95 put
Read the graph as a data table
Complete graph data; original fictional observations or model calculations
Underlying settlement price (USD)Combined terminal P/L before feesCombined terminal P/L after entry feesLeg 1: SELL 1 95 put
80-1,300-1,300.65-1,300
80.375-1,262.5-1,263.15-1,262.5
80.75-1,225-1,225.65-1,225
81.125-1,187.5-1,188.15-1,187.5
81.5-1,150-1,150.65-1,150
81.875-1,112.5-1,113.15-1,112.5
82.25-1,075-1,075.65-1,075
82.625-1,037.5-1,038.15-1,037.5
83-1,000-1,000.65-1,000
83.375-962.5-963.15-962.5
83.75-925-925.65-925
84.125-887.5-888.15-887.5
84.5-850-850.65-850
84.875-812.5-813.15-812.5
85.25-775-775.65-775
85.625-737.5-738.15-737.5
86-700-700.65-700
86.375-662.5-663.15-662.5
86.75-625-625.65-625
87.125-587.5-588.15-587.5
87.5-550-550.65-550
87.875-512.5-513.15-512.5
88.25-475-475.65-475
88.625-437.5-438.15-437.5
89-400-400.65-400
89.375-362.5-363.15-362.5
89.75-325-325.65-325
90.125-287.5-288.15-287.5
90.5-250-250.65-250
90.875-212.5-213.15-212.5
91.25-175-175.65-175
91.625-137.5-138.15-137.5
92-100-100.65-100
92.375-62.5-63.15-62.5
92.75-25-25.65-25
930-0.650
93.12512.511.8512.5
93.55049.3550
93.87587.586.8587.5
94.25125124.35125
94.625162.5161.85162.5
95200199.35200
95.375200199.35200
95.75200199.35200
96.125200199.35200
96.5200199.35200
96.875200199.35200
97.25200199.35200
97.625200199.35200
98200199.35200
98.375200199.35200
98.75200199.35200
99.125200199.35200
99.5200199.35200
99.875200199.35200
100.25200199.35200
100.625200199.35200
101200199.35200
101.375200199.35200
101.75200199.35200
102.125200199.35200
102.5200199.35200
102.875200199.35200
103.25200199.35200
103.625200199.35200
104200199.35200
104.375200199.35200
104.75200199.35200
105.125200199.35200
105.5200199.35200
105.875200199.35200
106.25200199.35200
106.625200199.35200
107200199.35200
107.375200199.35200
107.75200199.35200
108.125200199.35200
108.5200199.35200
108.875200199.35200
109.25200199.35200
109.625200199.35200
110200199.35200

The failure case

The stock gaps to 60. Buying at 95 still creates a 3,500 share shortfall; the 200 premium only reduces it. Cash secured describes funding, not a stop-loss.

Check your understanding

Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.

What is whole-position terminal P/L at QLT 90.00, before costs?

Reveal the worked answer

$-300.00

Use all signed legs, not just the winning leg. The popup and graph use the same ticket.

Critical risk question

Does a terminal loss bound guarantee every early-assignment or liquidation outcome?

Reveal the worked answer

No.

It describes the specified common-settlement payoff. Product rules, stock delivery, capital and execution still matter.

Takeaway

Explain the intended bullish-to-neutral ownership exposure, each leg's obligation and the adverse price region before using the strategy name.

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.

Read this lesson as Markdown · Download its JavaScript content module