Cash-Secured Puts: How to Get Paid to Wait for the Price You Want

TL;DR A cash-secured put is a promise to buy a stock at a price you choose, sold in exchange for a premium. If the stock drops to your price, you buy it where you wanted; if it doesn't, you keep the premium. I use it to earn 12-16% a year on cash that's waiting to be deployed.

Why I Use This Strategy

Here's a strategy I wish I'd learned 25 years ago: the cash-secured put. It lets me stop chasing companies I want to own and instead get paid while I wait for my price to come to me. Even in a broadly expensive market like today's, you can still create opportunity — it just depends on where you look and how you position yourself.

The core idea is simple. I want to buy this stock at a certain price anyway. So let me sell that promise to buy — and get paid for it.

1. My Cash Never Sits Idle

The biggest advantage is that my cash works while I wait. I keep the cash I'm holding for opportunities in 90-day U.S. Treasuries earning about 3.7%. The put premium stacks on top of that. As in the Microsoft example below, if I keep rolling one-month puts, I earn 12.2% a year on my cash — even if I never get assigned the stock.

2. I Decide the Price I Pay

The essence of this strategy is making the market pay me to buy at a price I set. I'm not chasing. I'm not panic-buying. I set my price and I get paid to wait. If the stock comes down to my price, I buy at a level I love and got paid to do it. If it doesn't, I pocket the premium and look at the next position. Either way, I feel like I won.

3. Microsoft, Live

Let's put numbers on it. Microsoft is at $375, and my calculated buy price is about $348 — call it $350. In the options chain, I pick an expiration a month or two out (say, July 17) and sell the $350-strike put.

The market tells me: “You want the stock at $350? Someone will pay you $3.41 per share for that.” If the stock is above $350 at expiration, I don't get the shares and I simply keep the $3.41. If it falls below $350, I buy at $350 — but the $3.41 is still mine, so my effective cost is $346.59.

Meanwhile, my cash is earning 3.7% in Treasuries. Roll this put over and over for a year and it works out to 12.2% a year on the cash, assuming I'm never assigned. If I'm comfortable paying $355, that return climbs to 15.5%.

4. The “Aren't You Losing Money?” Myth

Here's the most common objection. What if Microsoft falls to $300 at expiration? I still buy at $350 and keep the $3.41. “So you lost $45,” people say.

I don't see it that way. If Microsoft were at $350 today, I'd have bought it at $350 anyway. So that loss from the drop to $300 is a loss I'd have taken regardless — the only difference is that this way I got paid a premium to wait. That small difference is actually a big difference.

It can be emotionally hard, I'll admit. I handle it fine, but many people get shaken here. That's exactly why this strategy should only be used on companies you genuinely want to own at that price.

5. One More With Meta

I ran the same play on Meta. It's at $573, roughly $570 on my discounted cash flow and $588 on a multiple of earnings — basically sitting on my value. So I got a little greedy and looked at the $535-strike put: someone will pay me $7.15 per share. That's a 16.8% return on the cash.

I decided to sell puts on both Microsoft and Meta at these prices. Again — don't do it just because I'm doing it. But I'll always be transparent about the trades I make and the reasoning behind them.

FAQ

Q: What's the worst-case scenario with a cash-secured put? A: The stock falls well below your strike and you still have to buy at the strike. But that's the price you wanted to pay in the first place, and the premium cushions the loss. That's why the key is to only use it on companies you truly want to own.

Q: Is it a loss if I never get assigned the stock? A: No. In that case you keep the premium and your cash still earns Treasury interest. I treat it as a tool to boost the yield on cash that's waiting.

Q: Can beginners do this? A: The structure is simple, but it only works if you actually want to own the company at that price and you hold enough cash to take assignment. Without both, it's better not to do it.