Cash-secured put: the premium isn’t earned evenly by day
See when this premium is actually earned at each price, and why the position can show a loss for weeks when the price sits near the strike.
All figures are Black-Scholes model estimates, not market quotes or guarantees.
US stock and ETF options are American-style and can be exercised at any time. This model treats every option as European and does not model early exercise or assignment.
P&L by price and day (model estimate, current price 100, IV 30%, 30 days)
| Underlying price | Day 0 | Day 7.5 | Day 15 | Day 22.5 | Day 27 | Day 30 |
|---|---|---|---|---|---|---|
| 85 | −$874 | −$865 | −$859 | −$860 | −$864 | −$867 |
| 90 | −$471 | −$443 | −$412 | −$379 | −$366 | −$367 |
| 95 | −$177 | −$137 | −$89 | −$26 | +$32 | +$133 |
| 100 | $0 | +$34 | +$71 | +$110 | +$130 | +$133 |
| 105 | +$85 | +$105 | +$121 | +$132 | +$133 | +$133 |
Structure and cash: why $9,500 is set aside
A cash-secured put has one leg: you sell one put with a strike of 95 that expires in 30 days, and keep enough cash to buy the shares if you are assigned. Every number on this page assumes a current price of $100, implied volatility (IV) of 30%, a 4% risk-free rate, no dividends, 30 days to expiration, and one contract (100 shares).
The cash set aside is the strike times 100, or $9,500: enough to buy 100 shares at $95. The put brings in $1.33 a share, a net credit of $133.32, which lowers the amount actually at risk to $9,366.68.
P&L at expiration: at most $133, breakeven $93.67
- Max profit: $133.32, the premium, kept if the price finishes at $95 or above.
- Max loss: $9,366.68, if the stock goes to zero.
- Breakeven: $93.67, the strike minus the premium per share.
At expiration this has the same shape as a covered call: a capped gain above the strike and stock-like losses below it. At entry, Delta is +24.90 and the instantaneous Theta is +$4.26 a day.
Time profile: one premium, three ways of earning it
Price unchanged at $100. The premium comes in early and slows down: +$34 on day 7.5, +$71 on day 15 (53% of the total), +$110 on day 22.5. Only 17% arrives in the last 7.5 days, because a put $5 out of the money has little time value left by then.
Price at the strike, $95. The opposite pattern. The position starts at −$177 and stays negative until day 24.8; 51% of the gain arrives in the last 7.5 days.
Price well below the strike, $85. Time barely changes the result: −$874 on day 0, −$859 on day 15, −$867 at expiration. Here the loss on the put dominates, and the small dip at the end comes from the model effect described in the last section.
Near the strike: the last week decides
At $95, the position shows −$26 on day 22.5, +$32 on day 27, and +$133 at expiration. More than $100 of the gain arrives in the last 3 days, as the put’s time value runs out.
Small price differences matter a lot here. At expiration, $95 means +$133 and $90 means −$367, a $500 gap for a $5 move.
Deep in the money and early assignment
Deep in the money, the next-day change turns negative: below $81.23 on day 0, $84.21 on day 15, $89.48 on day 27, and $91.96 with 1 day left. A European put pays the strike only at expiration, so the model values it below its intrinsic value and lets it climb toward intrinsic as expiration approaches. For you as the seller, that climb is a cost.
With an American-style put, the holder doesn’t have to wait: exercising early collects the intrinsic value right away. These zones roughly mark where that becomes worthwhile, which is where early assignment becomes likely. The Lab shows an early exercise notice there.
Try it in the Lab: three experiments
The link keeps only the $95 and $100 lines. Compare their shapes: the $100 line rises fast early and then flattens (+$71 by day 15, +$130 by day 27), while the $95 line stays below zero for most of the month and rises steeply at the end.
Open in the LabWith the cursor at $95 on day 25, the P&L has just turned positive: about +$3. On day 24 it is still −$9.
Open in the LabOpen the time-effect map. Below the time-neutral line, in the low-price area, time hurts: below $84.21 on day 15 and below $91.96 with 1 day left. That is also where the Lab shows the early exercise notice.
Open in the Lab
Three common misconceptions
MisconceptionIf the price stays above the strike at expiration, you make money, so the position shows a profit along the way too.
What the numbers showAt $95 the position shows −$177 on day 0 and still −$26 on day 22.5. It turns positive only on day 24.8.
MisconceptionThe premium is earned evenly, day by day.
What the numbers showWith the price unchanged at $100, 53% is earned by day 15. With the price at the strike, 51% arrives in the last 7.5 days. The pace depends on where the price sits.
MisconceptionAssignment only happens at expiration.
What the numbers showAn American-style put can be assigned early. The model’s zone where time hurts (below $81.23 on day 0, below $91.96 with 1 day left) roughly marks where early exercise pays off for the holder.