Cash-secured put-write
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A put-write sells a put and holds cash to pay for the shares if assigned. Cboe's PUT index describes a systematic version that sells a sequence of at-the-money S&P 500 puts fully collateralized by Treasury bills. The premium is earned in quiet markets. In a sharp decline the put seller becomes the buyer of a falling market.
Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.
- Rules
- Sell a cash-secured put at a stated delta or moneyness, with cash set aside for the full assignment value. Hold to expiration or to the index roll date, then sell the next put if the rules still allow it. Do not use the premium to justify a second, uncollateralized put. If assigned, you own the underlying and the strategy has changed until you say otherwise.
- Where AI fits
- AI can check collateral before an order and can block a put sale that the cash balance does not cover. It can also list the dates when a short put would be assigned on a gap. It cannot make the loss profile symmetric. Any backtest has to include the crash months, not only the premium months.
- Markets
- Index options in the PUT index design. Single-stock cash-secured puts add gap and earnings risk.
- Timeframes
- Monthly cycle in the benchmark description.
- Risks
- Losses accelerate when the market falls and implied volatility rises together. Cash collateral earns a financing rate but does not cap the option loss. Assignment turns the position into stock at a bad time. Treating the premium as income without the assignment scenario is how this strategy gets misunderstood.