The Setup: How to Construct a Cash-Secured Put Trade

Five decisions, every time

A cash-secured put trade is not one decision. It is five wearing a single ticket. Someone who treats it as one, "I'll sell a put on XYZ", is making four implicit choices without noticing.

The five are the underlying, the strike, the days to expiration, the position size, and what happens after entry.

1. Underlying selection

The first decision is the only one that can save you from every later one. Get the underlying wrong and no amount of clever strike selection repairs it.

The test that matters most is whether you would accept owning it at the strike. Cash-secured puts can result in assignment. If assignment would be unwelcome, the trade is wrong from the start. If it happens, it is a loss, and its size is bounded only by how far the stock falls.

Beyond that, three things narrow the field. Option liquidity, because wide spreads eat the seller's edge before the trade has done anything. A business whose downside scenarios are bounded, since highly speculative names with binary outcomes compound risk in the wrong direction. And no imminent event you have not priced, whether earnings, a regulatory decision or a court date. Those are not disqualifiers, but they need their own rules.

A filter of "I would buy this name at the strike" does more risk management than most retail sellers do all year.

2. Strike selection

Two common framings, and most systematic sellers pick one and use the other as a check.

By delta, using a target band that defines the strike. Delta responds to volatility, so when expectations widen the same delta sits further from spot. That is usually a good property: the strike adjusts with conditions rather than staying fixed in a vacuum.

By percentage out of the money, using a target distance from spot. Simple, and blind to volatility, so it stays where you put it whether the market is calm or violent. The cost is that it can sit too close in a nervous regime and unnecessarily far in a quiet one.

There is a third lens that matters more than either. Where has the underlying actually moved in comparable conditions? A strike 8% below spot is not as defensible as the number suggests if the underlying has travelled 10% or more in a meaningful share of recent comparable windows. Statistical distance means little without demonstrated behaviour behind it.

That third lens is what ShieldIQ exists to supply, and it is why a strike that looks fine on delta alone can still fail here.

3. Days to expiration

DTE controls three things at once: how much premium you collect, how fast time decay works for you, and how exposed the position is to gamma near expiry.

Patrol scores contracts inside a defined range of expirations, paired with a strike-distance band. Inside that range, time decay is meaningful without being violent, and gamma is moderate enough that small moves in the underlying do not whipsaw the position.

Shorter contracts accelerate decay and the per-day yield, but they also accelerate gamma, so a small move against the position becomes a large move in profit and loss. Longer ones collect more total premium at a lower daily rate, and stay exposed for longer.

The decision is not which DTE is best in the abstract. It is which one matches the rest of your approach.

4. Position sizing

The decision retail sellers most often skip. The reasoning tends to be: I have $9,000, the put is a $90 strike, that is one contract, done. That is sizing by what fits rather than by what is sensible.

A short cash-secured put requires the broker to set aside the strike times 100 in cash. A $90 strike locks up $9,000 per contract until the position closes.

Concentration deserves thought at two levels. A single position representing too large a share of premium-harvesting capital turns one bad outcome into a serious one. And two positions on different tickers in the same sector are not two positions, because in a sector drawdown they move together.

Reserve capital matters too. A book using every available dollar has no room to react when something better appears.

StratosIQ does not size positions and does not advise on sizing. The scoring covers whether a contract is worth considering, not how much of your capital belongs in it.

5. What happens after entry

Here the approaches genuinely diverge, and the divergence is worth making explicit rather than assuming.

Some sellers manage positions after opening them, closing at a profit threshold or stepping out when a thesis breaks. Others hold to expiration and let the contract settle where it settles.

Both are defensible. What is not defensible is running one while measuring yourself as though you were running the other. A book closed at a profit target produces different statistics from a book held to expiry, and comparing the two tells you nothing useful.

Every contract Strike and Patrol publish is scored on the basis that it runs to expiration. Outcomes are recorded the same way: above the strike is a win, below it is a loss, nothing in between. That makes entry carry the full weight, because no later intervention is assumed to rescue it.

If you manage positions actively, the scoring is still usable. Your realised statistics simply will not match the published ones, and you should expect that rather than discover it.

A worked example

Numbers are illustrative.

XYZ is a large-cap consumer staples name trading at $100, with liquid options, no earnings inside the next 30 days, and a multi-year history of moving inside roughly a 10% band over any 30-day window.

Underlying. XYZ passes the "would I accept owning this at the strike" test. Liquidity is good. No event risk in the window.

Strike. Targeting the middle of the delta band, the $92 strike is closest, sitting 8% below spot. Historical 30-day moves on XYZ have stayed inside 8% in most comparable windows.

DTE. The monthly cycle 45 days out.

Premium. The $92 put bids at $1.20. That is $120 per contract against $9,200 of secured collateral, a return of about 1.3% over 45 days.

Sizing. The seller's own plan governs this. StratosIQ has no view.

Holding. The contract runs to expiry. If XYZ closes above $92 on expiration day, the put expires worthless and the $120 is kept. If it closes below, the position is a loss, measured against the strike rather than against breakeven.

Five decisions, each with a rule, each independent of the others. The next contract gets the same five applied the same way. That repeatability is the subject of systematic put selling.

How StratosIQ scores each decision

The platform does not make these decisions. It scores the inputs so you can apply your own rule to a consistent output.

Underlying is pre-filtered to liquid US equities and ETFs with tradeable option markets. The "would I accept owning this" test stays with you.

Strike is where most of the work happens. Safety carries the largest weight in the score, and ShieldIQ produces the floor that safety is measured against, checking the strike against how the underlying has actually behaved. The result is reported as a status: Fortified, Secure, Tight or Exposed. A contract that fails the safety floor does not publish, regardless of how attractive its premium looks.

Days to expiration and return on the capital committed both feed the score, alongside execution quality, so that a contract paying well in dollar terms but poorly against its collateral does not rank above one that does the reverse.

Since March 2026, the highest-scored contract published each day has finished out of the money 93.3% of the time, across 208 contracts. That figure and the underlying records are on the performance page.

Sizing and any post-entry management stay with you, because both should apply across your whole book rather than being sourced from a screening tool.