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Overview
A secured put is an options strategy where you sell/write a put option contract to collect the premium. If the put option is assigned, the option seller is obligated to buy the underlying stock at the contract strike price.
At Wealthsimple, secured puts are secured by buying power in your margin account. When you write/sell a secured put contract, you're required to have 100% of the assignment value available in buying power. This strategy enables you to generate income and establish a target price for buying stocks you're interested in owning.
You sell 1 put option contract for $3.50 with a $100 strike price expiring on a future date. You'll receive a premium of $350.
Margin requirement calculation: 1 contract × 100 shares × $100 strike price = $10,000
The buying power required is offset by the premium received.
Buying power required: $10,000 - $350 = $9,650
This $9,650 must be available in your account to secure the put and keep the position open.
Eligible accounts
We only offer secured puts in non-registered margin accounts.
Sell a secured put
Follow the steps below to sell a secured put:
- Log in to the Wealthsimple app
- Tap the Search icon at the bottom of the page
- Enter the name of the stock you want to trade options on
- Tap Trade
- Tap Trade options to view available contracts
- Switch your view to Put
- Choose your desired expiration date
- Choose a strike price and tap the Bid (sell) price
- Enter the number of contracts you want to sell
- Enter the limit price you'd sell the contracts for
- If applicable, choose your desired account
- Tap Review
- Review your order details
- Tap Submit order
- Log in to your Wealthsimple profile
- In the search bar at the top of the page, enter the name of the stock you want to trade options on
- Select the Options tab to view available contracts
- Switch your view to Put
- Select your desired expiration date
- Select a strike price and click on the Bid (sell) price
- Enter the number of contracts you want to sell
- Enter the limit price you'd sell the contracts for
- If applicable, choose your desired account
- Select Review
- Review your order details
- Select Submit order
Risks and considerations
When you sell secured puts, consider the following:
- You may experience substantial losses if the stock price drops significantly below your strike price.
- An open position ties up your buying power, and you can't access it unless you close the position.
- If you don't have enough cash to fully cover your secured put, and the value of your stocks drops, we may issue a margin call.
- If the stock price drops below the strike price, the options contract might require you to buy shares at a price higher than the current market value.
Options trading fees
Wealthsimple has a $0 per-contract fee on all successful buy and sell orders. Learn more about options trading fees and taxes.
Frequently asked questions
What happens if the put option is exercised?
If the option is exercised, you'll need to buy 100 shares of the underlying stock at the strike price. We'll use the buying power reserved in your margin account to complete this purchase. Note that if the required amount of cash isn't present in the account, you'll go into a cash debit position, for which you'll be charged interest.
How do I close a secured put position?
To close your position, you'll need to buy to close the contract:
- Select the position from your holdings.
- Set the number of contracts you want to close.
- Submit your order.
What's the difference between secured puts and covered calls?
Secured puts require you to sell put options and potentially buy shares, while covered calls require you to sell call options against shares you already own.
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