Options Wheel TraderHow to Pick a Strike Price for a Cash-Secured Put
October 12, 2026
The Strike Comes First, the Premium Comes Second
When I sell a cash-secured put I agree to buy 100 shares at a price I choose. The credit is what the market pays me for that promise.
Most questions I get about puts are about premium. "Which strike pays the most" is the wrong first question. The strike decides whether I end up owning a stock at a price I like or a price I regret. So I run four checks before I look at a credit.
Check 1: What Price Would I Be Happy to Own At?
The first number I write down is my effective buy price:
Effective buy price = strike - credit received
Sell the $50 put for $0.49 and my effective price is $49.51 a share. That is the number that matters. If the stock falls under the strike, I own 100 shares at $50 with the $49 credit in my account.
If I would not buy the stock at that price with my own cash today, I do not sell the put. No credit is big enough to fix a strike I do not want.
Check 2: Is the Strike Below a Level I Believe In?
I want my strike to sit under something real:
- A round number, because orders cluster there. $50 is a stronger level than $49.75.
- A recent low, or the bottom of the range the stock has held for a few months.
- Enough distance from the current price. For a steady large cap I want 7% to 10% of room. For a volatile name I want more.
The test: if the stock fell to my strike and stopped there, would I still want the shares? If not, I move down a strike or I pass.
Check 3: What Does the Cash Earn While It Waits?
The $50 strike needs $5,000 set aside for 100 shares.
Return on collateral = credit / strike
A $49 credit on $5,000 is 0.98% for the holding period, about 9.2% annualized over 39 days. That is the number I compare across strikes, not the raw credit.
This is where a lot of people stop. They compare a $49 credit to a $108 credit and take the bigger one. The bigger credit belongs to the strike closer to the current price, so it carries a higher chance of assignment. That trade-off is the real decision.
Check 4: Is the Chain Liquid Enough to Trade?
Two things on the exact contract I want:
- Open interest of a few hundred contracts or more, so there is a real market.
- A spread tight enough that the midpoint is not a fantasy. Under about 10% of the mid, and I price my order inside it instead of chasing the last tick.
A $0.02 wide market on a $1.00 premium is fine. A $0.30 wide market on a $0.50 premium tells me to skip the name.
Worked Example: BAC With 39 Days to Go
BAC closed at $54.42 on Friday, October 9, 2026. The November 20 monthly is 39 days out. These are the three puts I compared, priced at the midpoint of each bid/ask:
| Strike | Delta | Bid / ask | Credit per contract | Cash secured | Effective buy price | Return | Annualized |
|---|---|---|---|---|---|---|---|
| $50.00 | 0.17 | $0.47 / $0.51 | $49 | $5,000 | $49.51 | 0.98% | ~9.2% |
| $52.50 | 0.32 | $1.03 / $1.12 | $108 | $5,250 | $51.42 | 2.06% | ~19.3% |
| $55.00 | 0.53 | $2.10 / $2.18 | $214 | $5,500 | $52.86 | 3.89% | ~36.4% |
The $50 strike is 8.1% below spot and pays about 9.2% annualized on the cash. The $52.50 strike is only 3.5% below spot and pays more than double, with delta saying I own the shares about a third of the time. The $55 strike is already in the money, so I am choosing to own BAC.
Here is the same decision across three endings, 39 days later, per contract:
| BAC closes at | Sold $50 put | Sold $52.50 put | Sold $55 put |
|---|---|---|---|
| $56 | Expires, keep $49 | Expires, keep $108 | Expires, keep $214 |
| $51 | Assigned. Basis $49.51, worth $5,100, up $149 | Assigned. Basis $51.42, worth $5,100, down $42 | Assigned. Basis $52.86, worth $5,100, down $186 |
| $48 | Assigned. Basis $49.51, worth $4,800, down $151 | Assigned. Basis $51.42, worth $4,800, down $342 | Assigned. Basis $52.86, worth $4,800, down $486 |
The last row is the one I study. If BAC falls to $48, the $50 put is down $151 and I own shares at $49.51 that I can start selling covered calls against. The $55 put is down $486 for the same 100 shares.
Which Strike I Would Have Picked
I would have sold the $50 put.
- I am happy to own BAC at $49.51 for weeks or months. I am not happy to own 100 shares at $52.86 just because the credit is larger.
- The $50 strike is 8.1% below spot and it is a round number, where I expect buyers to show up.
- If I get assigned, my adjusted cost basis starts at $49.51 and falls with every covered call I sell after that.
The $52.50 put is not wrong. If BAC sits still I earn twice what the $50 put pays. I take that trade when I want the shares now.
The Mistake That Costs the Most
Selling the strike with the biggest credit and skipping the price question. That is how people end up assigned on a stock they never wanted, at a price above where it trades, with a loss bigger than every credit they collected that year.
Delta tells me the odds of owning the shares. The strike tells me the price I pay. I set the price first.
How I Stay Consistent
The scanner filters by delta and days to expiration, so I only look at puts inside the bands I use. The Capital Efficiency report shows what each open put earns against the cash it holds, which is how I catch a small credit that is not worth the collateral. For the expiry side, I wrote about why 30 to 45 DTE is the sweet spot.
What I Do Not Do
- I do not sell a put on a stock I would not own at the effective buy price.
- I do not sort the chain by premium and work backwards to a strike.
- I do not sell more contracts than my cash can cover at once.
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This article is educational and not investment advice. Options involve risk; read our Terms and consult a professional as needed.