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Picking the strike for a cash-secured put

Pick the strike for a cash-secured put by starting from the price you'd be glad to pay for the shares, then checking two numbers: the delta, a rough chance of being assigned, and the cushion, how far the stock can fall before you are. Premium comes last.

Options guide · 8-minute read · Updated 2026-10-26

Start from the price, not the premium

The strike is the price you promise to buy 100 shares at. So the first question is not "which strike pays the most?" It is "what would I pay for this stock today, without any option involved?"

Write that number down before you open the Options chain. If the answer is "I don't want it at any price," stop. There is no strike that fixes that. See only sell puts on stocks you want to own.

If you'd pay $45 for a $50 stock, your strike is $45 or lower. Now the chain helps you choose between $45, $44 and $42.

The three dials

Every strike moves three things at once. You can't improve one without paying in another.

The numbers are made up for a stock with ordinary volatility. Real chains differ. The shape never does: more premium always means more chance of owning the shares at a price closer to today's.

Delta: the chance you'll own the shares

Delta shows up as a column on most chains. For a put seller, it works as a rough guide to the chance the put finishes in the money. A 0.20 delta put has roughly a one-in-five chance of assignment by expiry, give or take.

That's a rule of thumb, not a probability you can bank on. It assumes calm markets and ignores gaps. But it turns "how risky is this strike?" into one number you can compare across stocks. Our greeks guide covers what delta really measures.

Many sellers in the wheel strategy live between 0.15 and 0.30 delta. Lower if they'd rather not own the shares. Higher if they'd like to.

Cushion: how far it can fall first

Cushion is the gap from today's price to the strike, as a percent. XYZ at $50 with a $45 strike has a 10% cushion. The stock can drop 10% and you still keep the whole premium with no shares.

Compare the cushion with how the stock actually moves. Pull up a chart and look at the last few months. If the stock swings 10% in a normal week, a 10% cushion is thin. If it moves 3% a month, it's wide.

The cushion is the number that keeps you out of a stock you didn't want yet. The premium is the number that tempts you to shrink it.

A worked example (an illustration, not a trade idea)

XYZ at $50. You'd pay $45. You compare two puts, both 30 days out.

Now XYZ falls to $43 at expiry. Both puts are assigned.

The $47 put paid $60 more up front and lost $140 more at the end. That's the trade every strike choice makes: more now, more risk later. Neither is wrong. The $47 seller should have wanted XYZ at $47, not just wanted $160.

A simple way to decide

1. Write the price you'd pay. That's your highest strike.
2. Check the cushion against the chart. If a normal pullback would hit the strike, go lower or wait.
3. Read the delta. If it's above 0.30 and you'd rather not own the shares, go lower.
4. Only then look at the premium. If it's too small to bother with at that strike, the answer is a different stock, not a higher strike.
5. Check the earnings date. If it falls before expiry, every row in the table above gets worse. See cash-secured puts before earnings.

The pages on out-of-the-money puts, at-the-money puts and in-the-money puts go deeper on each zone.

Questions