A thin cushion to breakeven is the nature of a cash-secured put — not a mistake
When the verdict says "thin cushion to breakeven," it isn't flagging a bad strike — it's describing the trade. A cash-secured put's only cushion is the premium, usually just 1-3% of the strike, so it absorbs a small dip below the strike and no more. But that cushion only matters if you wouldn't want the shares: sell puts only on stocks you'd happily own at the strike, and assignment is the plan, not a loss — the premium simply discounts your entry. Want a hard floor under the downside instead? That is a bull put spread, not a cash-secured put.
How to use this calculator
- Enter the stock's current price and the put strike you're considering.
- Enter the premium per share you'd collect and the days to expiration.
- Set the number of contracts - each one secures strike × 100 in cash.
- Read the result: return on capital, annualized return, breakeven, and your cost basis if assigned.
- Compare a few strikes - the plain-English verdict flags thin cushion or fat-but-risky premium.
What it tells you: whether a cash-secured put's premium is worth the capital you tie up and the assignment risk you take - in one read.
How this calculator works
A cash-secured put has one option leg — a put you sell — plus the cash you ring-fence to honor it. This calculator takes the put and the cash and works out the two outcomes that matter at expiration. Either the stock finishes at or above your strike and the put expires worthless, or it finishes below the strike and you are assigned 100 shares per contract.
If the put expires worthless, you keep the entire premium — that is your max profit. Return on capital is that premium divided by the cash you secured, which is the strike price times 100 per contract. If you are assigned, you buy the shares at the strike, but because you already pocketed the premium your effective cost basis is the strike minus the premium. That same number is your breakeven: the stock can sit there at expiration and you are flat.
The annualized return scales the return on capital by 365 divided by days to expiration, so a short-dated put can be compared fairly with a longer one. Discount to current price shows how far below today's market you are agreeing to buy; breakeven cushion shows how far the stock can fall before assignment actually costs you money. Treat annualized figures as a comparison tool, not a yield you can bank on every cycle.
Wondering how this strategy holds up over the long run? We backtested selling cash-secured puts on the S&P 500 every month for 21 years in cash-secured puts vs buy-and-hold: lower returns than simply holding the index, but roughly half the drawdown.
What is a cash-secured put?
A cash-secured put is an income and stock-acquisition strategy. You sell a put option and set aside enough cash to buy the shares if you are assigned. In return you collect a premium up front. It is "cash-secured" because the collateral is real money, not margin — so it can never trigger a margin call, unlike a naked put with the identical payoff.
It suits traders who would be genuinely happy to own the stock at the strike price. If the put expires worthless you are paid for waiting; if it is assigned you buy a stock you wanted at a price you chose, with the premium lowering your cost. Selling cash-secured puts and then covered calls on the assigned shares is the well-known wheel strategy.
Worked example
A fixed, hypothetical illustration — not live market data. The numbers stay constant so the math is easy to follow. (The calculator above loads with a live price; this example does not.)
Say a hypothetical stock trades at $230 and you would be happy to own it at $220. You sell one 30-day $220 put and collect $3.80 per share — $380 in premium for the contract.
- Cash secured: $220 × 100 = $22,000 set aside.
- If it expires worthless: you keep the $380 premium — a 1.73% return on capital in 30 days, roughly 21% annualized.
- Breakeven / cost basis if assigned: $220 − $3.80 = $216.20.
- Discount to current price: the $220 strike is 4.3% below the $230 market — and the stock can fall 6.0% before your breakeven is breached.
I think of the assignment outcome as the "you got what you asked for" case. If I sell the $220 put, I have to actually want the shares at $216.20 net. If I do not, I am selling the wrong strike — or the wrong put.
Edge cases this calculator handles
Selling a put looks simple until the strike sits in the wrong place or assignment looms. The calculator surfaces the cases that change the trade.
- In-the-money puts. If the strike is above the current price the panel flags it: assignment is more likely and the discount-to-price turns negative, meaning you would be agreeing to buy above today's market.
- The number that matters on assignment. Return on capital is the headline, but the effective cost basis if assigned — strike minus premium — is shown alongside it, because that is the price you actually end up paying for the shares.
- An honest capital base. Return on capital is measured against the full cash you must secure (strike × 100 per contract), not a thinner margin estimate, so the percentage is never flattered.
- Zero days to expiration. Annualized return and premium-per-day show "N/A" rather than dividing by zero.
- The real margin of safety. The breakeven cushion shows how far the stock can fall before the trade loses money — separate from, and more useful than, the raw premium.
Common mistakes
"Juicy premium isn't the reason to enter. It's the reason to investigate harder." More: when to skip a Cash-Secured Put.
- Selling puts on stocks you do not want to own. If you would not buy the shares at the strike, do not sell the put. Assignment should be an acceptable outcome, never a disaster.
- Treating the premium as free money. Your downside below breakeven is large — the same as owning the stock. A juicy premium does not offset a stock that falls 30%.
- Not actually securing the cash. Selling the put on margin turns it into a naked put. The payoff looks identical until a sharp drop triggers a margin call.
- Chasing yield on volatile names. The fattest put premiums sit on the shakiest stocks. High return on capital and high assignment risk travel together.
- Ignoring earnings and ex-dividend dates. A put sold over an earnings report can be assigned deep in the money after a gap down. Know the calendar before you sell.
- Over-sizing. Each contract commits the full strike value in cash. It is easy to sell more puts than you could comfortably be assigned on at once.
Frequently asked questions
How is cash-secured put return calculated?
Return on capital is the premium you collect divided by the cash you set aside, which is the strike price times 100 per contract. If the put expires worthless you keep the whole premium — that is your return on the secured cash.
What is the breakeven on a cash-secured put?
Breakeven is the strike price minus the premium received. If you are assigned, that is also your effective cost basis per share — the price you really paid after the premium credit.
How much cash do I need to secure the put?
You set aside the strike price times 100 shares for every contract sold. A $50 strike means $5,000 of cash held per contract, so that you can buy the shares if the put is assigned.
What happens if the put is assigned?
You buy 100 shares per contract at the strike price, paid for with the cash you secured. You keep the premium, so your effective cost basis is the strike minus the premium. Many traders then sell covered calls on the assigned shares — that is the wheel strategy.
Can I sell a cash-secured put above the current share price?
Yes — that is an in-the-money put. You collect more premium, but you are agreeing to buy above today’s market price and assignment is far more likely. The calculator handles this; it is flagged, not treated as an error.
Is a cash-secured put the same as a naked put?
The position is the same short put. The difference is collateral. Cash-secured means you hold the full cash to buy the shares. Naked means you rely on margin. The payoff is identical, but the cash-secured version cannot trigger a margin call.
What does annualized return tell me?
It scales the return on capital up to a yearly figure using 365 divided by days to expiration, so you can compare puts of different durations. It assumes perfect repetition, so treat it as a comparison aid rather than expected income.
When should I use a cash-secured put?
When there is a stock you want to own at a strike below the current price - the put pays you to wait, and if assigned you buy at a discount. It works best with implied volatility high enough to make the premium worth the obligation. Skip it if you are only chasing premium - if you would not want the shares at the strike, you are underwriting a stock you do not like.
Related tools and guides
Got assigned, or already own the shares? Sell a call against them with the Covered Call Calculator. To track premium and cost basis across the whole put-then-call loop, use the Wheel Strategy Calculator. If the put goes in-the-money, repair it with the Rolling Decision Calculator. Build any multi-leg structure with the Payoff Diagram Builder.
For the strategy behind the math, read Covered Call vs. Cash-Secured Put, What Happens When an Option Is Assigned, How to Choose a Strike Price and How Much Buying Power Options Use. Every term is defined in the options glossary. Comparing strategies? See Cash-Secured Put vs Bull Put Spread.
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Educational tool only. Nothing here is financial advice. Selling puts carries the full downside risk of stock ownership — size positions accordingly and only sell puts on stocks you are willing to own.