Today we’ll be discussing cash secured puts and how to sell them within the thinkorswim web app. We’ll start by learning what they are, how they work, and how to manage them throughout the life of the trade.
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Cash-secured puts are one of the simplest forms of options selling. It’s created by selling an out-of-the-money put while ensuring you have enough cash set aside in the account to take assignment in the event the option ever gets exercised. Although it's a put, it’s a directionally bullish trade, but the profits mainly come from time decay and volatility decreasing.
It’s generally used to generate income, but others sometimes use it to enter a new stock position. Almost treating them like limit orders to buy the stock, but ones they get paid to put on.
Timestamps
0:00 Intro
0:21 How to access tos web
1:36 Option chain explained
3:53 Selling a cash-secured put
10:02 Closing a short put
11:46 Best practices
11:58 Picking expiration
13:05 Picking strikes
15:03 When to close
16:39 Cash secured put example
17:32 Attaching profit-taking order (bracket)
19:06 Outro
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