Cash Covered PUTS - a strategy to make money

I just try to discuss the how the cash covered puts of highly volatile stocks can make money.


Fidelity gives that I can earn min $80 (0.80 cents) if my $800 (8 put) locked as cash covered puts in a month.

If this works out, it is direct 10% gain in a month.

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Huh? The strategy employed by @marcus335 and me for many many many moons. I believe @pastora does that too. Normally we call that cash secured puts :slight_smile: Anyhoo, I don’t have cash, I secured using equities. Because I have no intention of buying the stocks, I always short put with strike price below current market price i.e. DITM e.g. short MRNA put ($130) instead of ATM then i.e. $150. I just want to be prudent, lesser profit but less chance to get assigned.

True, True, I am learning that art…
second, time to time, implied volatility changes and the puts will work nicely with such high IV stocks.
Now, it is KODK as the IV exploded now.

Correct, in addition, we need to count the return percentage with locked amount.

In KODK it works out appx 10% in a month.

That is what fidelity calculates and provides max return out of the money options.


:+1: Good deal.

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How do you secured with equity? Does your brokerage lock your cash if you are doing the short put?

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Yes, locked. Without adequate cash, it won’t allow you to sell the puts.

For cash only and no equities account or insufficient equity.

Say you hold $1M worth of GOOG + some cash. You can buy on margin $1M as the “cash” to secure short put. Ofc is too risky, I use 15% as norm ie. $150k as “cash” to secure the short put. So long the worth of GOOG is enough to secure the short put, the cash is free (you can withdraw them if you want).

Since I am using ToS and Fidelity, both platform shows how much margin is available for trading :slight_smile:

Using equity instead of cash to secure short put is risky in a bear market, more risky for put of similar equity because decrease worth of equity means decrease margin for trading.

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This is PLTR high IV just 3 days getting better return

Return is $121 for locked amount $2800 days left 3.

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this is very interesting! thanks for posting, i had no idea how it worked. :slight_smile:

Do you need margin account to make this happen? I use fidelity and was able to do short put with cash reserve, but not able to use other stock I have as collateral (or know how to).

All option accounts are margin account. I use Fidelity too. My approval level for option is level 5 - max level :slight_smile: I think your is level 2 :slight_smile: You need level 4 to be able to short put vs equities, and level 5 for short put vs index.

Another short put, if it comes let me buy

Screenshot 2020-12-09 at 10.44.26 AM

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