Choosing a strike for cash-secured puts

When you sell a cash-secured put, every strike choice is a trade-off between two things: how much premium you collect today and how likely you are to be assigned the shares. Strikes closer to the current stock price pay more premium but are assigned more often; strikes further below pay less but are assigned rarely.

There is no single correct strike. The right choice depends on whether you would be happy owning the stock at that price. If assignment would upset you, the strike is too high or the position is too big — not the other way around.

The put's delta is a quick shorthand for the probability of finishing in the money. A 0.30-delta put has roughly a 30% chance of being assigned at expiration; a 0.15-delta put, roughly 15%.

Many wheel sellers live in the 0.15–0.30 delta range. Lower delta means fewer assignments and a wider safety cushion; higher delta means fatter premium but shares put to you more often. Pick the end of that range that matches how much you want to own the stock.

Raw premium is hard to compare across strikes and expirations. Convert it to a yield: premium divided by the cash you set aside (strike × 100), then annualize by dividing by days to expiration and multiplying by 365.

A $1.20 premium on a $50 strike put with 30 days left is $120 on $5,000 of collateral — about 2.4% for the month, or roughly 29% annualized if you could repeat it. Comparing yields, not dollar amounts, keeps you honest about which strike is really paying you.

Time decay (theta) is not linear — it accelerates in the final weeks of an option's life. Selling puts with roughly 30–45 days to expiration captures much of that accelerating decay while leaving room to react if the stock moves against you.

Very short-dated puts decay fast but pay little and demand constant attention; very long-dated puts tie up your cash for a small monthly yield. The 30–45 day window is a common compromise, not a rule.

The cardinal rule of cash-secured puts: only sell a put if you genuinely want to buy 100 shares per contract at that strike, with cash already set aside. That is what makes it 'cash-secured.'

If a single assignment would blow up your allocation to one name, sell fewer contracts or choose a lower strike. When assignment is sized correctly, a stock drop is just the wheel entering its next phase — you own shares at a price you chose, and you start selling covered calls.

Before selling a put, ask: Would I happily own this stock at the strike? Is the cash set aside? Is the annualized yield worth the risk? Is the delta in a range I can live with? Is 30–45 days the horizon I want?

If every answer is yes, the strike is a good one for you. CycleIQ then journals the leg so the collected premium and eventual cost basis stay tied to the same cycle.