Cash-secured put

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.

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

Check your understanding

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