How to Sell Cash-Secured Puts on Robinhood – Options Trading Explained

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In this article, we will explore a live example of selling a cash-secured put option on Robinhood’s platform. A cash-secured put option is a type of options trading strategy that involves selling a put option and collecting a premium from the buyer. The seller of the put option is obligated to buy the underlying stock at the strike price if the buyer exercises the option. The cash-secured part of the strategy means that the seller must have sufficient funds in their account to cover the purchase of the stock if they are assigned.

In this example, the author has chosen Intel (INTC) as the underlying stock and has set a strike price of $52. This means that if the stock price falls below $52 before the option expires, the author will be assigned and will be required to buy 100 shares of the stock. However, the author is comfortable buying the stock at this price and is happy to do so if they are assigned. The author has set a price limit for the option to sell for $1.17, which is above the current market price. The author believes that the stock is undervalued and is expecting its price to increase in the long term.

The article then goes on to explain the benefits of selling cash-secured puts, including the ability to collect a premium and the potential to buy the underlying stock at a discount. The author also discusses the importance of understanding the Greeks, which are financial metrics that measure the sensitivity of an option’s value to changes in its underlying stock price. The author suggests that a delta of 30% is a good target for cash-secured puts, as it indicates a good balance between premium collection and the possibility of being assigned.

Finally, the article concludes by discussing the benefits of selling cash-secured puts and suggesting that it can be a good strategy for those who are comfortable buying the underlying stock at a discount.