What Is a Cash Secured Put Screener?

If your first options trade was a covered call, your next will be cash secured put.  

A cash secured put screener is a tool that can be used to scan market data for income-producing cash secured put options. The user can choose from various criteria and filters (such as a range of prices for the underlying stock, strike prices, expiration dates, and stock fundamentals) to find their optimal position. 

Based on the criteria, the screener will then return a list of stock positions, showing data such as the current market price, the available strike prices for the put options, the bid and ask prices for the put options at present, and downside protection.   Based on this data, an investor can then determine if a particular put option is a good addition to their portfolio.  Comparing the income earned against the risk of a stock price decline and stock ownership will allow users find the best cash secured puts.   

On top of the best covered call screener available, a premium subscription to optionDash includes access to our cash secured put screener.  You can use our advanced screening criteria and optionDash scoring systems to find your ideal cash secured put. Now you must be thinking what is a cash secured put?

Nearly identical to covered calls, you can generate income with cash secured put.  On this trade, you sell a put option while setting aside all the cash necessary to buy the stock using our cash secured put screener. In most cases, investors begin with an out-of-the-money put so that the share price has to decline in order to be assigned.  The ideal scenario is that the shares stay the same price (like covered calls), and you simply collect the premium without ever owning the shares.

Most traders just use their covered call screener or covered put scanner for their cash secured puts search.  With optionDash, you can specifically search for the best cash secured puts available.  Dividend payments are the biggest factor affecting call and put premiums differently.  You don’t have to worry about it when using our cash secured put screener. 

Difference Between Cash-Secured Put Screener & Cash Covered Call Screener

A cash-secured put screener and a cash-covered call screener offer many of the same functions. They both generally allow users to input criteria to generate a list of options that they might wish to trade. Both strategies give an investor ways to boost income from their portfolio.  

The main difference is in the type of options searched for. Cash-secured puts are a contract binding the seller to purchase shares at the pre-determined strike price, while covered calls bind the seller to sell shares at the strike price. Covered calls require you to already own shares of the underlying stock.  For cash secured puts, you could be assigned shares if the market price drops below the strike price before the expiration. 

Cash secured puts are a great strategy if you’d like to buy more shares if the price declines.  Rather than simply hope for a price drop, you can sell a cash secured put.  You will be paid for the option sale and only purchase shares if the stock price declines below the strike price you’ve chosen.  

Another difference comes in references to an option being “out of the money.” For a cash-secured put, this refers to a strike price that is lower than the current market price for the underlying stock. For a covered call, this is a strike price that is higher than the current market price for the stock. Understanding “out of the money” is important when entering your search criteria for both cash secured put and covered call screeners.

How to Sell Cash Secured Puts?

After locating a cash secured put option that you wish to sell, the next step would be to go to your brokerage account and enter a “Sell-to-Open” option order. If you are only selling one type of put option (i.e. all at the same strike price and on the same expiration date), you can utilize the simplest option order form on your brokerage site; these are frequently referred to as “Basic” or “one-leg” order forms.

On the order form, you will generally be asked first to enter the ticker symbol of the underlying stock position. After doing so, you will be asked to enter pertinent information for the order, including the type of option (in this case, a put), the strike price you are selling the put at, the expiration date for the option, the quantity of the option that you are selling.  Keep in mind, options trade in contracts not shares.  Each contract represents 100 shares of the underlying stock.

On the option order form, you can choose to sell the option at the current market price (the bid price), or you can attempt to sell it at a limit price. Market orders should execute immediately at or near the bid price.  Limit orders require a certain premium before execution.  Limit orders may not execute if an option buyer is not willing to pay the set premium.  

If there is a wide difference between the bid and ask prices for an option (which represent the maximum prices that a buyer and seller, respectively, are willing to pay for it), you can also enter a limit order and attempt to sell the option for a price that is higher than the bid price, but lower than the ask price. This allows investors to minimize the spread and maximize the premium received for the option sale.  

After placing the order, you will want to ensure that it has filled. Brokerages will generally offer an “order status” screen for you to check to see if an order has been executed or not. Selling cash-secured puts at the market price will generally result in orders being filled instantaneously. Selling at a limit price, however, may take more time. If an order has not filled after a set period of time, the seller may wish to modify the order and attempt to sell the option at a lower limit price, or at the market price.

How Are Cash Secured Puts Similar to Covered Calls?

  • You sell-to-open both options

  • You receive a premium (or income) from both trades

How Is a Cash Secured Put Different From Covered Calls?

  • You own the stock when selling a covered call.  You can own the stock when selling puts, but you aren’t required to.  Instead, you have to have the cash available to purchase the shares. 

  • The basic difference between Cash secured put vs Covered call is that with covered calls, you will be assigned if the price goes above the strike price of the call.  The opposite is true for puts.  You will be assigned if the price drops below the strike price of the put.

Many traders love to use puts to start a covered call position.  They will sell puts until assigned, and then use those shares to sell covered calls.  This is often referred to as the options wheel strategy.  They are also useful if you believe the shares are more attractive at a lower price.  You can sell puts and collect a premium even if the share price never declines. Setting up cash covered put screener is easy.

Cash Secured Put vs Covered Call, Which Is Better?

We believe both are great ways to lower risk and generate income from a stock portfolio.  

Check out our cash-secured put screener during your 14-day free trial or purchase a premium subscription to use the tool.