Selling Cash Secured Put Example on Fidelity Investments

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★ How to Sell Cash Secured Puts - Options Trading Strategy
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Introduction to Put Writing
A put is a strategy traders or investors may use to generate income or buy stocks at a reduced price. When writing a put, the writer agrees to buy the underlying stock at the strike price if the contract is exercised. Writing, in this case, means selling a put contract in order to open a position. And in exchange for opening a position by selling a put, the writer receives a premium or fee, however, he is liable to the put buyer to purchase shares at the strike price if the underlying stock falls below that price, up until the options contract expires.
Profit on put writing is limited to the premium received, yet losses can be rather substantial, should the price of the underlying stock fall below the strike price. Due to the lopsided risk/reward dynamic, it may not always be immediately clear why one would take such a trade, yet there are viable reasons for doing so, under the right conditions.
Put Writing for Income
Put writing generates income because the writer of any option contract receives the premium while the buyer obtains the option rights. If timed correctly, a put-writing strategy can generate profits for the seller, as long as he is not forced to buy shares of the underlying stock. Thus, one of the major risks the put-seller faces is the possibility of the stock price falling below the strike price, forcing the put-seller to buy shares at that strike price. If writing options for income, the writer's analysis should point to the underlying stock price holding steady or rising until expiry.
Best Practices for Selling Put Options
Investors should only sell put options if they're comfortable owning the underlying security at the predetermined price because you're assuming an obligation to buy if the counterparty chooses to exercise the option.
In addition, you should only enter trades where the net price paid for the underlying security is attractive. This is the most important consideration in selling puts options profitably in any market environment.
Other benefits of put selling can be exploited once this important pricing rule is satisfied. The ability to generate portfolio income sits at the top of this list because the seller keeps the entire premium if the sold put expires without exercise by the counterparty. Another key benefit is the opportunity to own the underlying security at a price below the current market price.
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#Fidelity #CashSecuredPuts #TradingOptions
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DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.
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[@JakeBroe]

Give this video a LIKE to support my channel! Also check out my entire playlist on Trading Options here! kzbin.info/aero/PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU

[@Mssilverbelle]

Finally !! An explanation with step by step visual. I'm new to this and have watched a bunch of these and realized I am a slow learner :-) . Yours is the best tutorial . I have $5000 in my Roth I am willing to test Cash secured puts , then covered Calls. It's in Fidelity so Starting with a PUT . Thank you !

[@julierehoric3856]

Thank you sooooo much. My cousin started to change my life by teaching me this, I want to learn all I can on my own as not to burden anyone else. This removed ALL my anxiety of wondering if I can do this. (Someday I hope to be able to afford Costco lol)

[@JakeBroe]

You are very welcome Julie! Best of luck!

[@dpofwa8430]

Best explanation I have come across - THANK YOU! This was very helpful.

[@staxxius]

Jake, you are so clear and concise. Thank you sir.

[@nsharma99]

Thanks Jake! Great video and walkthrough of how to actually apply all my learnings. You’re great 👍.

[@Bangpaulxu]

I have learned so much from you over the past year. Thank you so much for these vids. Very informative.

[@JakeBroe]

Thanks for watching all my vids, haha! Cheers!

[@blaisenicoletti2950]

Thank you Jake. Great videos. I’m just getting started with options trading and you have been a big help.

[@larryclark7778]

Thank you for explaining cash secured puts. This video was very helpful.

[@ginamoreau3651]

Thank you ! I found your videos very helpful. I learned about options for awhile but I was able to figure out the fidelity platform until I clicked on your video. I have already made covered calls...

[@jandeguzman8900]

I was wondering if you could show an example of rolling at csp on fidelity?

[@toshi7220]

Great vid. Thank you!

[@lucygoose6052]

Best video explained! Thank u

[@dazedhavoc]

Wonderful information thank you, I'll be watching more!

[@RackyRyan]

Keep up the great work Jake! You are the man!

[@JakeBroe]

Thanks Ryan! I appreciate that!

[@JoseSanchez-tp1zv]

great detailed explanation. Thanks

[@bobsclassiccarsparts8772]

That’s was a very good & informative video. Thank you

[@Alexcabrera29]

Amazing info!!👍

[@raymundvalderrama]

Jake thank you for a very quick reply, sorry to ask another question. Why is it that the closer i am to strike price the more im losing money? Shouldnt be ill start losing money once i hit the strike price and it goes lower?

[@samschneider7261]

much help!

[@jamjam5158]

Great work

[@sorabhutube]

Hi Jake .. thanks for this can you pls tell how to read a position after you have taken it ? Like whether the position is making money or not .. for example they say to take profit when you are close to 70% of max profit but I am not sure on how to see that gain level in a fidelity position. For cash secured puts

[@user-ju3tn2gu4j]

Excellent!

[@matthewsherwin8741]

Well Jake you have done your usual excellent job! I always learn from you or get a solid refresher. I wonder who was the jerk who gave this a thumbs down! Jealous, no doubt. Thanks again and cheers! 👍

[@JakeBroe]

Thanks Matt! Cheers!

[@07anesthesia]

I am very new to options trading but trying to understand the total picture. I appreciate you explanation in the video but I didn’t understand the outcome once you bought the put to close it out. If you sold the put for .52 & bought it back to close for .52, did you make money?

[@JimHabash]

Thanks Jake, good video, sub'd.

[@JakeBroe]

Awesome! Welcome to the channel Jim! Great to have you with us!

[@mahct09]

Another great video. Can we still expect that options specific video. Thx again for all the knowledge. Your playlist has been amazing.

[@JakeBroe]

Hey mahct! I have a video going up Monday more specific to what I look for when buying calls. The video after that will speak more generally how I look for new stocks.

[@mahct09]

@@JakeBroe I just watched your I am up 84% video. It was also very insightful. Thank you for sharing your journey with us. I look forward to the Monday video.

[@theresamorgavi9196]

if BAC hits the strike price - will broker automatically take my collateral and give me 100 shares? or do i need to call fidelity in order for shares to display in my account? thanks!!!

[@tm2183]

when do you actually get the premium? do you get the premium if you buy the put back?

[@Stinger2020]

Miss your stock videos

[@Gtube10000]

Thanks so much for your simple explanations. Jake, I think you should come back to options instead of covering wars😢. Question for you - have you ever tried Fidelity’s ATP? It appears you prefer the web version. Why?

[@jonboyfutch8081]

Does it close Automatically if you do nothing by expiration date and it hasn't reached the strike point ?

[@DicksonMaimouth]

When Jake loses money just to teach us something, you’re obligated to smash the “like” button.

[@karlreid9677]

Hello! Thanks for the videos! Also, would it be a good idea to do covered calls on a high dividend yield ETFs/stocks (e.g. QYLD)? That way the contract and the monthly dividend could work together. Thanks again!

[@robertog.6596]

Not enought premium

[@lolwtnick4362]

nope. it's figured in. high dividend yields make the stock prices drop on ex dividend date.

[@josephle367]

Hi Jake, After watching your video, I have a hard time to understand some numbers like "Today's gain/loss or total gain/loss. All of these number were negative red". And why the current value is also negative -$52.00 instead of positive? (Video 10:37) Thank you for your explaination

[@JakeBroe]

You are very welcome Joseph! Thanks for watching! Cheers!

[@dinhtran426]

I do sell put and Expiration is 7 days, if I want to buy to close after 4 days Do I get to Collect the premium of those 4 days?

[@michaelsokoloff6400]

Is there a cost cost to exit position?

[@raymundvalderrama]

Thank you Jake!! This I’m sure helped a lot of us that wants to jump in but scared cause we don’t know what to do. Question if you don’t mind, will I still get the money even if I get assigned??

[@JakeBroe]

Yes, you always keep the premium you were paid.

[@raymundvalderrama]

@@JakeBroe thanks Jake. Im planning to do this on etfs. Same principle right??

[@jamesjacob6841]

Can you teach us to roll options on fidelity?

[@dianagreenlee8212]

Thank you for this video - this is really good. But when you buy to close, aren't you giving back your initial profit? It seems like this could go sideways pretty easy if you have to buy to close more what you originally sold for. Am I missing something?

[@JakeBroe]

No, you are correct. If you sell to open (and collect a premium) and you want to buy to close it back before expiration, you have to pay back the present value of the contract to be free of the obligation to sell your stock... but if you are doing this, then that means your stock went up in value and you get to keep it now. Not so terrible!

[@eyobhagos4899]

Which level of options trading do you need for fidelity to sell a put and use your account value (not cash) as collateral in case you get assigned?

[@JakeBroe]

Hey Eyob! I would go for Level 3!

[@USis1]

I got a serious question but u never mentioned it. What stops u from selling a cash secured put with fantastic premium, u then get assigned the stock, and u immediately turn around an sell all 100 shares as quickly as u got assigned it, thereby not incuring much loss if the price is on a downtrend.

[@davidqi8073]

curious what happened for this order look back from today to 2 years ago, lol

[@t-techvids9659]

Shouldn't the max loss be at $3800? the amount of 100 shares you're going to buy if market price does hit that price on set on your sell put option?

[@brielleandquinn3281]

God bless you

[@ei6648]

Hey Jake, I have a couple of questions if you would please be so kind. If you sell a cash secured put, do you have to buy it to close the position? Can you just let it expire if the price is higher anyways? What happens if you don't close at expiry (or before expiry) the put option you sold with a strike price of $38 when the price is above the strike? - Thanks in advance Jake

[@JakeBroe]

Hey e i! If you sell a cash secured put and the price goes up, and the contract is out of the money, you can just let it expire. The contract will disappear from your account over the weekend and you don't have to do anything.

[@ei6648]

@@JakeBroe Ok, thank you Jake! I appreciate it.

[@kyleb3094]

Just wanted to say this for you and your viewers. Be careful about holding bank stocks especially during uncertain financial times. They are the first ones to go

[@ETube37]

Nice call

[@Plutosaplanet602]

Whenever you get out of the position, i.e. buy to close, do you do this after the expiration date (assuming the price of the stock never hit the strike price)? Thanks!

[@JakeBroe]

If you buy to close, you must do this BEFORE expiration. At expiration after market close, if the contract is in the money then you will be exercised on. If the contract is out of the money then it is worthless to the buyer and it will disappear over the weekend from your account without you needing to do anything.

[@Plutosaplanet602]

@@JakeBroe Right, ok, so buying to close is an optional part of the process. If I am understanding this correctly, you would only buy to close if the price is getting close to the strike price and you don't want to be assigned the shares.

[@leek8638]

Hi Jake, would you want this exchange (sell to open, put) as a cash order? I noticed that you went with "margin". And, what if I already own the 100 shares to sell to open (put)?

[@JakeBroe]

Hey Lee! If you already have 100 shares and sell to open again, then you are writing a contract to potentially buy another 100 giving you a total of 200. I always use margin to cover my sold puts because it doesn't cost anything, but if you want to stick to just what cash you have in your account, you can do that!

[@gib1262]

U can sell covered call to collect premium from your 100 shares

[@xxIndridcold99xx]

great explanation ! If I am selling a CSP for FB at $320.00 that expires in a month, do I still need to buy to close the option is going to expire out of the money ?

[@JakeBroe]

Hey! You don't need to buy to close it if it is way out of the money. It just expires worthless. If it is in the money or close to being in the money and you don't care if you buy the stock at the strike, then keep holding it.

[@xxIndridcold99xx]

@@JakeBroe Hi Jake, thank you so much for the quick follow up. I really enjoyed your video and subbed. I look forward to learning more from you ! Have a great week.

[@raymundvalderrama]

Will you get the credit if you get assigned?

[@loganpadilla3554]

Which level do I need to be to do the Wheel Strategy on Fidelity? It is level 2, right? I should be able to sell a covered call and sell a cash secured put, right?

[@JakeBroe]

Hey Logan! Yes, Level 2 should be good!

[@loganpadilla3554]

@@JakeBroe thank you very much for replying!

[@kimjongun9555]

Fidelity charges $0.65 per option trade, but Robinhood charges $0.03, is this correct?

[@jdean1134]

Off topic but, what officer jobs would you recommend for a dream sheet knowing what you know now about being an Air Force officer? I have a biology degree and there aren’t many options, not even space force apparently

[@JakeBroe]

Hey j dean! Knowing what I know now... just try and find a comfy office job. Public Affairs Officer, Finance Officer, Personnel Officer are all excellent administrative jobs and you can go to any base. If you want to be more involved in "the mission", then you can be an intelligence officer. Pretty much any other job and you'll limit what bases you can go to and be dealing with stressed out enlisted people all day every day.

[@jdean1134]

@@JakeBroe thank you. Would the promotion potential and timeline be the same across these positions? How old were you when you commissioned?

[@JakeBroe]

@@jdean1134 , I was 32 years old when I joined. And yes, everyone promotes to 1Lt and Captain at the same time. People have to compete for Major and above.

[@jdean1134]

@@JakeBroe makes me feel better, I’m 33. Haha thanks Jake! I’ll look at those positions you recommend.

[@picklerpickler8785]

Can you explain the spaxx?

[@rjr2071]

Spaxx is just one of Fidelity’s money market accounts. It’s what your cash sits in when it’s not invested in any stocks or options. Basically, like a bank account, it has some interest rate which you collect once a month on your cash.

[@bunnapev1917]

Do you still collect interest on the collateral kept in spaxx while you wait for the shares to be assigned?

[@jjjjjjjjjjjjjjjjjjj804]

From options to Ukraine. What a wild ride.

[@Simone-jg8lp]

Level 2 and you don't need margin for a covered call or cash secured put.

[@umrthrower]

Fidelity recently changed it to Level 1

[@laughuntilyoucryordie]

Very well explained thank you!