Professional Options Trading Course

Lesson 6: Selling Cash Secured Puts

Adam Khoo Bang Pham Van

Professional Trader Options Trader & Specialist

www.piranhaprofits.com
www.wealthacademyglobal.com
 Strategy 5: Selling Cash Secured Puts
Purpose:
• Buying a stock at a discount or even for free

Strategy:
• As a value investor, you have identified a fundamentally good company that you want to own for the
Long term (i.e. 100 shares of Coca Cola KO). However, you would like to buy it at a discount (i.e. $46)
below the current market price (i.e. $47.15)
• Instead of waiting for it to drop to $46, you decide to SELL KO 46 PUTS and Collect the premium
($0.57 x 100 = $57).
• If KO shares fall below the Strike Price (i.e. $46) by Expiration date, I am OBLIGATED to buy the
shares at $46 (less the premium I have collected)
• If KO shares do not fall below the Strike Price ($46) by Expiration date, I keep all the premiums as
profits…. And repeat the process. Either way, I am happy!

Coke (KO) Long term,

fundamentally strong company

Market price $47.15

Sell KO 46 Puts
Strategy 5: Selling Cash Secured Puts

Market price $47.15

Sell KO 46 Puts@$0.57

40 Days to
Expiration

• If KO shares fall below the Strike Price (i.e. $46) by Expiration date (e.g. 40 days), I am
OBLIGATED to buy the shares at $46 x 100 = $4,600 (less the $57 premium I have
collected)

• If KO shares do not fall below the Strike Price ($46) by Expiration date, I keep all the
premiums (e.g. $57) as profits…. And repeat the process. Either way, I am happy!
 Case Study - Selling Cash Secured Puts

• You want to buy 100 shares of PG for your portfolio. Current Price is $91.22
• You would like to buy it at a lower price of $89
• You decide to Sell 1 contract of PG 1st March 89 Puts. This Contract has 43 days to
expiration.
• What is the total premium you collect? _____________

$91.22
$89
 Stock Selection
• Only Sell Puts on fundamentally strong stocks that you want to own. You should ideally have
the cash in your account to buy the shares, should the Put Option expire ITM and you are
assigned the stock
• For PG, you should have cash of 100 shares x $89 = $8,900 set aside
• When you sell the Put Option, roughly 20% of the stock’s value will be blocked from your
account’s buying power. In this case, 20% x $8,900= $1,780 is blocked

Entry Strategy
• Ensure the Stock is on an Uptrend
• Sell Put Options when Implied
Volatility is High (IV Percentile above
40-50 is ideal)
• Sell an OTM Put at your ideal Strike
Price (i.e. the Price you want to buy
the shares at)
• 35-40 Days to Expiration (monthly or
quarterly options)
 Strategy Exit Scenarios
Scenario 1: The Stock Price is At or Above Strike Price at Expiration
• Option expires worthless & you keep the entire premium as profit
• Consider selling a new put option at a new expiry date and new/same
strike price. Collect the premium!
• Repeat the process until scenario 2 occurs

Scenario 2: The Stock Price is Below the Strike Price at Expiration

• You will be assigned the stock at the strike price
• The 100 shares will appear in your account and the cost of the shares
will be deducted from your account
• Once you own the stock, you can consider selling covered calls on it
 Selling Cash Secured Puts
Advantages and Risks
• Advantages:
• Buy Stock at a Discount or Even for Free
• Get paid while waiting for your ideal price to be reached - keep collecting the
premium as profit, as long as the stock price remains above your strike price

• Risks:
• Same risks as buying the stock outright
Professional Options Trading Course
Lesson 6: Selling Cash Secured Puts

Adam Khoo Bang Pham Van

Professional Trader Options Trader & Specialist

www.piranhaprofits.com
www.wealthacademyglobal.com