Guide
Cash-secured puts for portfolio income
Selling cash-secured puts is the income engine behind the wheel. Here's how the premium works, what you can realistically earn on a Treasury base, and how to size it without overreaching.
What is a cash-secured put?
A cash-secured put (CSP) is a put option you sell while setting aside enough cash to buy the shares if you’re assigned. You collect a premium today in exchange for agreeing to buy 100 shares per contract at the strike price through expiration. Because the cash is set aside, there’s no leverage and no margin call risk on the position itself — the “worst case” is buying a fund you wanted to own at a discount to today’s price.
Where the income comes from
Two layers stack. First, the cash backing your puts doesn’t sit idle — parked in T-bills or a money-market ETF, it earns the risk-free rate. Second, each put you sell adds option premium on top. Sell a 30-day put, collect the premium, and if the price stays above your strike it expires worthless and you keep all of it. Repeat monthly and the premium compounds alongside the base yield.
How much can you realistically make?
Honest framing matters here, because the internet is full of inflated “100% a year” claims that quietly ignore assignment losses. A disciplined, diversified CSP program on liquid ETFs targets roughly 8–10% gross annualized as a base case — essentially the prevailing T-bill yield plus collected premium — and up to 9–12% in favorable volatility regimes. These are gross, pre-tax targets, not guarantees, and the range floats with interest rates.
The risks
- Assignment in a downturn. When markets fall hard, puts get assigned and you own shares that keep dropping. The premium softens the blow but doesn’t erase it — drawdowns can be significant.
- Selling when you’re not paid for it. In calm, low-volatility markets, premium is thin. Forcing trades to “stay invested” is how the strategy underperforms its own base. Discipline says: when implied volatility is low, stand aside and let the base earn.
- Concentration. Selling too many puts on one name (or sizing too large) turns a steady income strategy into a directional bet.
Sizing it sensibly
The key discipline is notional — the total value of shares you’d have to buy if every open put were assigned. Keep total notional in a sane multiple of your account value (a conservative program targets about 1.0×), spread across several tickers and staggered expirations, and you avoid the trap of being maximally short the market right when it turns. This is exactly the kind of bookkeeping that’s tedious by hand and easy to get wrong.
How ReTrader helps
ReTrader tracks your notional and per-ticker limits in real time, gates new puts by an implied-volatility percentile so you only sell when premium is rich, computes the breakeven and downside buffer on every trade, and reminds you when a position needs attention. It recommends and tracks — you execute through your own broker. Built for self-directed investors with $500k+ in a Portfolio Margin account.
Educational only — not financial advice or a recommendation to buy or sell any security. Return figures are gross, pre-tax targets, not guarantees; selling options carries real risk and drawdowns can be significant in sharp market declines, especially at higher notional multiples. Consult a CPA and a qualified financial advisor before implementing any strategy described here.