Cash-secured put calculator
See the annualized return, break-even, and downside cushion on a cash-secured put, the first leg of the wheel strategy.
How a cash-secured put pays you
When you sell a cash-secured put you agree to buy 100 shares at the strike price, and you set aside the cash to do it. In exchange you collect a premium immediately. If the stock closes above the strike at expiration, the put expires worthless and the premium is yours. If it closes below, you buy the shares at the strike, and the premium you already pocketed lowers your effective purchase price.
The return math
The single-cycle return is the premium per share divided by the strike, since the strike times 100 is the cash you have committed. Annualize it by scaling for the days to expiration. A $1.20 premium on a $50 strike held 30 days earns 2.4 percent for the cycle, which annualizes to roughly 29 percent if you keep repeating it. The break-even sits at the strike minus the premium, and the downside cushion tells you how far the stock can slide before you would be underwater versus that break-even.
The first leg of the wheel
The cash-secured put is where the wheel begins. Keep collecting premium while the stock stays up, and if you are eventually assigned, you pivot to selling covered calls against the shares you now own. Both legs are the same idea: get paid to wait at a price you like.
Track every cycle automatically
This calculator sizes up one contract. Telemetry tracks the whole strategy. Its options wheel tracker ties each put and call back to the underlying, folds collected premium into your cost basis, and shows the real annualized return on every position. See the full walk-through in the options wheel calculator.
Common questions
What is a cash-secured put?▾
A cash-secured put is a put you sell while holding enough cash to buy the shares if you get assigned. You collect a premium up front. If the stock stays above the strike, you keep the premium. If it drops below, you buy the shares at the strike, with the premium lowering your effective cost.
How is the return on a cash-secured put calculated?▾
Divide the premium per share by the strike price to get the return on the cash you set aside for one cycle, then multiply by 365 divided by the days to expiration to annualize it. A $1.20 premium on a $50 strike over 30 days is about 29 percent annualized.
What is the break-even on a cash-secured put?▾
The break-even is the strike price minus the premium you collected. Below that price, the position starts to lose money on paper, though you own the shares and can sell calls against them. In this calculator the downside cushion shows how far the stock can fall to the break-even.
How does this fit the wheel strategy?▾
Selling a cash-secured put is the first leg of the wheel. If you are assigned, you own the shares and sell covered calls against them, which is the second leg. Telemetry tracks both legs together so you can see the full return on each name.
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