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Why I do not like Cash Secured Puts (Patreon)

Published:
2025-08-08 20:54:41
Imported:
2026-06
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Content

TLDR

  • Margin is key

  • Cash secured puts are a waste of time in my mind unless we are at rock bottom prices before a massive move.

Why Cash-Secured Puts Have Low ROI
With cash-secured puts, you have to keep the full amount of cash on the side in case you’re assigned. That money just sits there, so even if you make a good premium, the return on your total capital is small.

Example: Sell a $200 put for $5 ($500 premium) but need $20,000 cash reserved — that’s only a 2.5% return for the trade.

Why Margin Helps
Using margin for put selling changes the math. Instead of tying up 100% of the strike price in cash, the broker only requires a fraction (often 15–30% depending on the asset and your account). That reduces the denominator in the ROI formula, so the same premium produces a much higher percentage return.

It also helps me free up capital for other trades.

PS I have oodles of margin from being in trades early and holding them, you know when I say TSLA is my Money Market now - well those shares I get become margin to trade and sell puts on other assets.. Also my MSTR bag is at a very very low cost so all that is Margin also. Just a few examples.

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Comments

TitusPullo

Man you are a legend thank you so much for this heads up. I've been dedicating cash to this play until now 🙏🏻

rambo10

In a margin put you’re not paying the fees unless you get assigned

J

Every stock has different margin requirements. I think TSLA has a 40% requirement for naked putts But MSTR is actually 400% for naked puts

Moto 89

Any thoughts on the bullish IPO this month?

Memento Mori

@MattG Thank you. I was unaware of this strategy. I'm still on the learning curve on buying and selling puts and calls. It's making more and more sense as i move forward. I took a screenshot and will wrap my head around it later today.

Theresa

I use margin also, but it still ties up the full amount in margin. I'm not sure I understand where the 15 to 25% is that you're talking about. I thought the advantage of buying on margin was you don't pay interest on that margin until you are assigned, so as long as you aren't then you just collect the premium. Can anyone clarify this?

SBullls

For Robin Hood, I am in the highest level, allowable for options, and it still only lets me sell cash secured puts.

Outer-01

Hey James, any videos on explaining this more in depth? Is it in one of your series

Mind B Free

I've done them on occasion as a quick, short term play. I think the edge is in the high implied volatility that can come with a sharp downward move. A short put spread can achieve the same thing with a little less of an edge, but with lower margin requirements.

CryptoBoomer

I agree. But I sit waiting for moves for a few weeks sometimes, why not collect some CSPut premium with a one or two week option. If a signal to make a move occurs I close the CSP early and make the trade. I’m getting about 30% APR while waiting for more preferred trades.