Today I’m using the cash-secured put exactly the way I want to use it, taking one of my repeat performers that has already gone through a significant pullback and structuring the trade far enough underneath the market that I don’t need an immediate move higher for it to work.
The chart is starting to stabilize after the recent decline. Selling pressure has eased, the stock has been building a base around its recent lows, RSI has worked back toward neutral, and MACD is beginning to improve after spending time in negative territory. The stock still has technical work to do before I’d call the trend fully repaired, but for a cash-secured put I don’t need a perfect chart. I want improving conditions combined with enough distance between the current share price and my strike to give the trade room to develop.
That’s what makes this setup attractive to me. I’m placing the strike below the current market and below the recent consolidation area, giving me a sizable cushion if the stock stays sideways or retests support. At the same time, I’m collecting premium while I wait for the technical picture to continue improving.
The probabilities also fit the structure, with a 70% Probability of Worthlessness (POW) and a 75% Probability of Profit (POP). The higher POP reflects the additional cushion created by the premium, meaning the shares can even finish below my strike and the trade can still be profitable at expiration.
If the stock continues rebuilding, I collect the premium. If it pulls back far enough for assignment, I’m adding additional shares at a level I’m comfortable owning and can move directly into covered calls. That’s the flexibility I’m looking for with this setup.
Here’s how I’m playing it today.
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